Gerald’s Real Estate Article Insights: Reasons to Use Home Equity – 5 Good, 1 Bad
Untapped home equity can be a dangerous temptation for homeowners and real estate investors. You have to be careful before you take on additional debt, even if it’s mortgage debt which is normally considered to be good debt, because when you do, you increase your monthly fixed payments. People often tap home equity to renovate or upgrade a property. This may be a very good idea if you’re renovating an income-generating property so that it earns more money for you. However, I have seen many people over-renovate their primary residence spending tens of thousands of dollars on over-the-top kitchens and bathrooms that they didn’t need and didn’t really increase the value of their home!—also, don’t forget, you’re supposed to pay all the money back at some point! One big danger in taking a home equity loan out on a property exists if that equity line interest rate is not fixed—if interest rates go up, so will your monthly payment, which could spell disaster for you down the line. Be smart and spend equity wisely or leave it alone!