There has been a lot of drama this last year, and no one can say otherwise. Even with a new president, mass vaccinations, and a “united” Congress, the pandemic isn’t going away. And people are still hurting financially.
Should You Use The Equity In Your Home?
It’s times like these that my clients inevitably ask me about using the equity in their home by either:
- Taking a second mortgage
- Getting a Home Equity Line of Credit (HELOC), or a Home Equity Loan
My advice in all but the gravest of situations is: don’t do it.
Your Biggest Investment?
For most of us, our home represents the biggest investment we’ll make. And that investment is one we’re counting on to play the role of life savings. Yes, I know that most of us have retirement accounts and other assets. But the home?
That’s not only where the heart is, it’s where the money really is.
Why would you want to jeopardize it?
Exhaust All Other Options First
Hear me out. I’ll admit there are some circumstances where you may need to consider stripping away the equity you’ve built into your home. But ONLY after you’ve exhausted all your other options:
- Broken open retirement assets
- Stripped away any consumer-driven spending
And so on. Then MAYBE you should be exploring a HELOC – and I’ll get into my reasons for that in a minute.
Keep Creditors Informed When There Are Problems
If you’re in dire financial straits, have you picked up the phone and called your creditors? Yes, it hurts to discuss it. And collections people are inevitably heartless and trained to NOT listen to your excuses or reasons. But those phone calls are noted in your file, providing documentation of your plight that may be helpful as you try to negotiate.
Years ago, I remember a real estate investor who was in a financial bind and behind on everything – car, house, office rent, health insurance, and so on.
Every Tuesday morning, he’d call his creditors and listen to them hound him for money he didn’t have. I well remember seeing him once, soaked in cold sweat, and asking him, “Bob, why do you do this to yourself?”
His answer was simple, “Because they can’t say I didn’t tell them.”
Through his diligence and determination, he was able to bring every debt current. In some cases, he negotiated a settlement for a smaller sum, allowing him to pay the balances off completely.
Was it tough? You bet! I can’t imagine doing that every week for months (and, by the way, the phone calls from them didn’t stop, either. Many months later, he jokingly recalled, “Once, I got off the phone with the bank that had the house and fourteen minutes later, the fools in the same office called me to ask where their money was. Those weren’t fun times.”)
The idea of communicating with your creditors might seem old-fashioned, but the truth is, it can be a critical way to keep from losing your assets when times are tough.
In the end, you really do have to make decisions about pulling equity out of your home while you’re current on the payments. But if you worry about clouds on your financial horizon, let’s discuss all the options on the table instead of simply ripping away your financial hard work. It might be the right answer, but it is never the only answer.
Reach out to me and the team and discuss it before you do anything!
My team and I are more than happy to answer your questions. Use the button below to ‘Book a Free Consultation’ or give us a call or send us a message through our contact form below and let’s get you on the right track!
