Why Tapping Into Your Home Equity Is A Bad Idea?
It is no longer a secret that the housing market is not stable; in fact, it has never been stable. Just like bubbles, the value of homes goes up one day only to go down the next day. This uncertain ebb and flow of the housing market have made homeowners suspicious. They can not decide whether or not it is a sensible idea to jump into the housing market, and when they do, they fail to grasp the concept of home equity. Going back to the Great Recession of 2008, it becomes apparent that it takes no longer for the prices of houses to go up and down.
Essentially, home equity means the total value of your house if you minus the loans you owe. This could mean the outstanding amount that you owe or mortgage loans. Apparently, if you own a house, you can borrow more money. But simply because you ‘can’ do something does not mean that you ‘should’ do it. This is especially true when it comes to home equity.
Regardless of your current financial status, we do not recommend tapping on your home equity. And the reason is that if you did tap on your home equity, you might put your home at potential risk. The lender may kick you out of the house if you fail to pay the borrowed money within the due time. At this point, you will not have any legal justification to claim that house back.
Here are some of the reasons why tapping on your home equity is a bad idea:
You May End Up Losing Your House
One of the foremost risks of tapping into your home equity can be you may end up losing your house. According to reports, the value of houses has gone up by 45% since the pandemic. This means that an average homeowner can get up to $200k in equity. But for that, you need to have a mortgage in place.
Apparently, the reason is that if you are unable to make the payment, the lender can foreclose your house and kick you out. If you can not make the payment, you will lose your house.
You Can Use Your Equity As Your Savings When Needed
There is no doubt that your home equity is an asset that you can use whenever you want. But it does not mean you should tap into it without proper planning. A better way to utilize your equity can be using it while you have no savings in place and desperately need emergency funds.
At this point, you can have peace of mind thinking that you have your equity in place. You can then tap into it and use it as your savings.
More in Financial Planning
Money Management Tips to Improve Your Finances
Effective money management is the cornerstone of financial stability and achieving your long-term financial goals. Regardless of your income level, mastering...October 6, 2023
Tech Investments | Why Ashton Kutcher Stopped Acting for Money
Imagine living a life of financial freedom where you get to choose your roles without having to worry about the paycheck....October 1, 2023
The Pros and Cons of Loyalty Programs
From airlines to coffee shops, retailers to tech companies, it seems everyone is offering a loyalty program to attract and retain...September 21, 2023
Hiring an Elder Law Attorney? Read This First!
The golden years of life come with a new set of challenges, and not just in the form of remembering where...September 16, 2023
U.S. Credit Card Debt Surpasses $1 Trillion: Addressing the Elephant in the Room
The U.S. economy is experiencing a significant milestone in the history of credit card debt. For the first time ever, credit...September 10, 2023
The Consequences of Living Without a Bank Account
In today’s modern world, having a bank account is considered a basic financial necessity for managing money and participating in the...August 30, 2023
Establishing a Successful Celebrity-Backed Business Brand
Having a celebrity endorse your brand is one of the best ways to generate buzz and get your products noticed. However,...August 22, 2023
Largest M&A Deals: The Biggest Mergers and Acquisitions
Mergers and acquisitions have been a part of business for centuries. They are often used to grow companies and to create...August 17, 2023
Fixing a Broken Engagement Is Possible – Here’s How
When two people come together to be in a romantic relationship, everything feels magical and promising. With time, the relationship moves...August 13, 2023