6 Reasons You Might Be Tempted to Spend Your Home Equity: What You Need to Know to Avoid a Financial Disaster

posted on December 15, 2017

Are you thinking about a loan against the equity in your home? You only want to do this under certain conditions. Learn when it's OK to borrow money against your home -- and when you should avoid it at all costs.

Yes: Renovations

It's OK to use home equity to pay for renovations. As a general rule: Use home equity to pay for what you need, but not what you want.

Maybe: Investment

This is safe as long as interest rates are low. If you can borrow at 4% and then make 8% on your money, you'll have no issues.

Maybe: A Student Loan

You usually pay less interest on a home equity loan than on a student loan The risk: you may have to delay retirement if you borrow a lot.

Maybe: Retirement Income

Reverse mortgages give you money now. You pay it back when you sell your home. Look at the numbers to make sure they work for you.

No: Pay Off Credit Cards

Don't put your home at risk because you spent recklessly. If you default on your cards, you pay extra fees. If you default on a home equity line of credit, you can lose your house.

Maybe: Emergence Funding

Borrow money against your home in an emergency only if you absolutely need to. Try to avoid this, as you could lose your home if you miss payments.

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