Home Equity: A Liquid Asset

By Gabriel Traverso
Local Lender Columnist
Apr 9, 2007
Thinking about home ownership and mortgage debt has changed--homeowners are no longer expected to sit on their home equity and strive to pay their mortgage off. Instead, your home may be an asset that can be tapped for better living or investing.

Taking Advantage of Your Home Equity

David Lereah, chief economist for the National Association of Realtors, characterizes paying off your mortgage as "unsophisticated," and the equivalent of hiding your money in your mattress. He, like many economists today, believes that the liquidity of home equity is an asset that should be managed along with the rest of your investment portfolio. Rather than work for years to pay off your mortgage, it should be leveraged. The bottom line? Your home is more than just a place to hang your hat.

Reasons to Refinance Your Mortgage

If you've been sitting on the fence about tapping into your home equity, afraid it might disappear, there may be a number of good reasons to refinance. If you plan on living in your home for some time it is worthwhile to consider remodeling options--are there changes you could make that would not only improve the quality of living in your home but also boost its value?

Many homeowners also choose to refinance for debt consolidation. This may be especially wise if current mortgage rates are lower than the rate you pay now, or if second mortgage rates are less than what you are paying on your credit cards. Consider also whether you can derive a tax advantage from shifting debt to your home, make sure that you can afford the new payment, and finally make a firm commitment to refraining from running up that debt all over again.

One very good but less-considered reason to refinance is to take advantage of an opportunity to invest your home equity dollars elsewhere for a better return. A financial advisor or accountant can help you make that determination.

Work with your loan officer and investigate your options. Perhaps it's time for you to join the millions of American homeowners and explore the ways you can access your home equity dollars and put them to better use.

Source
Los Angeles Times: Home Equity at Risk

About the Author
Gabriel Traverso is a freelance writer, professional musician, and an artist. He resides with his family in Reno, NV.