What to do with Home Equity

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LD1515
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What to do with Home Equity

Post by LD1515 »

Hello everyone ... new to the forum ... looking for some ideas from the group ... thank you in advance for any comments ...

I own my home ... no work on the house wanted or needed (thank God) ... last appraisal 1 yr ago was 200k ... properties in our area don't appreciate very quickly but they generally don't drop in value much either ...

It seems to me that having that amount of money tied up in something that doesn't grow isn't the best use of capital ... but maybe I'm just thinking too hard ...

I don't have anything in particular that I would do with the money (buying a business etc) but that's probably because I'm not smart enough to consider all the options available ... which leads to this post ...

so ... I could probably pull 150k out of the house ... any ideas on what to do with 150k?

again, thanks in advance ... and I apologize for any stupidity on my part upfront ... thanks again
runner3081
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Re: What to do with Home Equity

Post by runner3081 »

Thinking too hard.
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David Jay
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Re: What to do with Home Equity

Post by David Jay »

We don't know how old you are, how far from retirement, and what your other assets look like. But it would be cold day in August before I took out a mortgage on my home to invest the money elsewhere.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius
Monsterflockster
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Re: What to do with Home Equity

Post by Monsterflockster »

David Jay wrote: Sun Jun 28, 2020 7:42 pm We don't know how old you are, how far from retirement, and what your other assets look like. But it would be cold day in August before I took out a mortgage on my home to invest the money elsewhere.
This. I know many people that took out HELOC loans to invest pre 2008 & lost their home after the crash.

Does it make sense to take a loan at 3-6% interest to invest? Would you be ok paying that interest on the full amount having lost 50% due to a crash? Would you sell or hold on long term?

Personally I’d leave the house alone.
annu
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Re: What to do with Home Equity

Post by annu »

How big is your emergency fund? If you lose tour job, can you afford to pay mortgage for extended period of time?

If you do feel like risking and taking on leverage, look into margin loan.

Owning a home, is a great win, why risk it to see if you win the second time around as well and taking s loan.
7eight9
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Re: What to do with Home Equity

Post by 7eight9 »

Some would advocate never paying off your home ...

Interest only mortgage: the conservative choice?
viewtopic.php?f=2&t=304655#p5036906
I guess it all could be much worse. | They could be warming up my hearse.
260chrisb
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Re: What to do with Home Equity

Post by 260chrisb »

David Jay wrote: Sun Jun 28, 2020 7:42 pm We don't know how old you are, how far from retirement, and what your other assets look like. But it would be cold day in August before I took out a mortgage on my home to invest the money elsewhere.
Welcome to the forum. I couldn't have said it better!! Enjoy living in a paid for home and use other money to save and invest and get over it. Why is a paid off house not a good use of capital and why does everything have to be the best use of capital? Ya, you're over thinking this. Besides; this can't be your only asset right? Sounds like you want permission to borrow money to invest. You may find it, but not here.
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anon_investor
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Re: What to do with Home Equity

Post by anon_investor »

runner3081 wrote: Sun Jun 28, 2020 7:16 pm Thinking too hard.
+1.
New Providence
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Re: What to do with Home Equity

Post by New Providence »

One of the downsides of using your Home Equity to take risk in exchange for profit is that you could lose your house.

Proceed with caution.
Starfish
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Re: What to do with Home Equity

Post by Starfish »

Pretty much everybody has a mortgage AND money invested in the market at the same time. I don't see the problem.
I have no intention to sell my investments to pay off my house although I could.
Outer Marker
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Re: What to do with Home Equity

Post by Outer Marker »

Super bad idea. The security of owning your home puts you in an enviable position. If you want to leverage that advantage, you could take a more aggressive equity allocation than you might otherwise. Funnel your would-be mortgage payments into equities.
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celia
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Re: What to do with Home Equity

Post by celia »

It took us 30 years to pay off our mortgage the old fashioned way. There’s no way I would start over.

Think of the equity as paying your ‘rent’ every month. Isn’t that worth something, especially in retirement? That also means your retirement expenses will be lower.
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Sandtrap
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Re: What to do with Home Equity

Post by Sandtrap »

LD1515 wrote: Sun Jun 28, 2020 5:29 pm Hello everyone ... new to the forum ... looking for some ideas from the group ... thank you in advance for any comments ...

I own my home ... no work on the house wanted or needed (thank God) ... last appraisal 1 yr ago was 200k ... properties in our area don't appreciate very quickly but they generally don't drop in value much either ...

It seems to me that having that amount of money tied up in something that doesn't grow isn't the best use of capital ... but maybe I'm just thinking too hard ...

I don't have anything in particular that I would do with the money (buying a business etc) but that's probably because I'm not smart enough to consider all the options available ... which leads to this post ...

so ... I could probably pull 150k out of the house ... any ideas on what to do with 150k?

again, thanks in advance ... and I apologize for any stupidity on my part upfront ... thanks again
Why do you want to be in debt?
Why do you want to give ownership of your home back to the bank?

j :happy
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j0nnyg1984
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Re: What to do with Home Equity

Post by j0nnyg1984 »

You will find a wide variety of opinions here on this subject. Personally, I wanted my mortgage paid off ASAP.
I kept my retirement account contributions maxed but every other penny went towards paying it off. It took me like 4 years 😊
valuables
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Re: What to do with Home Equity

Post by valuables »

Sell the house and actualize the equity to cash out and downsize. Then take the remainder and invest it in VTI! We'll send you a free bogleheads bumper sticker each time you do this.
av111
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Re: What to do with Home Equity

Post by av111 »

This question I have grappled with frequently as well.

About 25% of the NW is tied into the primary home. 45% more is locked into equity in investment real estate that currently yields all the income we need

It is incredibly relaxing and satisfying to let it run as is because a. It was the goal for us 10 years ago and b. We have small needs on a monthly basis.

But when I read bogleheads.org threads I get restless and want to take some equity out and put it in stocks.

I scratch the itch by putting the mortgage that would be due into wealthfront every month
AV111
Scatterbrain
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Re: What to do with Home Equity

Post by Scatterbrain »

If your income is stable and you have ample reserves, I don’t see anything wrong with levering up to 50% LTV or so to invest in a diversified fund IF you have a fairly long investment horizon for the money. It’s not going to be worth the loan/appraisal fees if you are trying to play the market for a year.

This really isn’t much different than prioritizing taxable accounts over prepaying a mortgage - just a different sequence that will make people paranoid. Mortgage debt doesn’t make me as nervous as it does others on this board, though. Index funds are more diversified than a house, so I’d rather my equity be there.
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22twain
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Re: What to do with Home Equity

Post by 22twain »

LD1515 wrote: Sun Jun 28, 2020 5:29 pm I could probably pull 150k out of the house
About what % of your net worth is that?
Help save endangered words! When you write "princiPLE", make sure you don't really mean "princiPAL"!
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LittleGreenSoldiers
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Re: What to do with Home Equity

Post by LittleGreenSoldiers »

LD1515 wrote: Sun Jun 28, 2020 5:29 pm ... I could probably pull 150k out of the house ... any ideas on what to do with 150k?
Take the $150K and pay off your mortgage. Oh, wait. :oops:

Yep. Thinking too hard. Just keep buying into low cost total market index funds with the money you don't pay on a mortgage every month.


Welcome to the forum.
novemberrain
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Re: What to do with Home Equity

Post by novemberrain »

If
1. S&P crashes more than 50% from today's levels
2. AND you still have rock solid emergency accounts that can cover 2 years of living expenses
3. AND a bank will give you a HELOC
Then
take the HELOC & invest in S&P index fund after the market crash.
That is what I am thinking of doing.

The prevailing wisdom in bogleheads is to leave alone a paid off house. But the prevailing wisdom in bogleheads is also to prioritize stock investing ahead of extra home loan payments. I find those 2 pieces of advise conflicting.
Dottie57
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Re: What to do with Home Equity

Post by Dottie57 »

runner3081 wrote: Sun Jun 28, 2020 7:16 pm Thinking too hard.
+1

Take good care of the property is all I can say.
babystep
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Re: What to do with Home Equity

Post by babystep »

LD1515 wrote: Sun Jun 28, 2020 5:29 pm Hello everyone ... new to the forum ... looking for some ideas from the group ... thank you in advance for any comments ...

I own my home ... no work on the house wanted or needed (thank God) ... last appraisal 1 yr ago was 200k ... properties in our area don't appreciate very quickly but they generally don't drop in value much either ...

It seems to me that having that amount of money tied up in something that doesn't grow isn't the best use of capital ... but maybe I'm just thinking too hard ...

I don't have anything in particular that I would do with the money (buying a business etc) but that's probably because I'm not smart enough to consider all the options available ... which leads to this post ...

so ... I could probably pull 150k out of the house ... any ideas on what to do with 150k?

again, thanks in advance ... and I apologize for any stupidity on my part upfront ... thanks again
Please provide more details including age, assets in taxable, pre-tax and roth etc. to provide the better answer. There may be scenarios when it is better to cash-out from home and invest.
Topic Author
LD1515
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Re: What to do with Home Equity

Post by LD1515 »

runner3081 wrote: Sun Jun 28, 2020 7:16 pm Thinking too hard.
I suspected that ... thanks for the wake up call ...
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LD1515
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Re: What to do with Home Equity

Post by LD1515 »

First of all ... WOW .... thank you all very very much for your feedback ... a quick summary of comments so far are

- Roughly 80-85% ... some version of "thinking too hard" ... invest any proposed mortgage payment into VG index fund of some flavor and go back to sleep ...

- Remaining 15-20% ... need more personal info ... pulling money out to invest may make sense under some circumstances ... ok ... here goes

Bio ... me age 53 ... wife age 53 ... sold business 2 years ago ... 2 children (one 24 and off the payroll (thank God) ... other 19 in college paying full
retail for tuition etc)

both scaled back working 2 years ago ... downsized our life/expenses accordingly to regain some peace ... will take occasional project
here and there ... those projects do not come by often but if/when they do we pass on most ... because we continue to pass, future
opportunities will probably come along less often

do not expect to have to financially contribute to our parents care

Finances ... 2 m taxable ... 1 m traditional IRA

thank you again ... looking forward to any/all responses ...
1moreyr
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Re: What to do with Home Equity

Post by 1moreyr »

My dad retired in 2000 at 58 years old. He had $1M in savings and a pension of $16,000. he said he spent very little beyond the pension until he got social security in 2004. I asked him how in the world did he live on $16K a year? He said, "its amazing how little you need when you own your home!

That really stuck with me. Now my dad is superfrugal and his girlfriend of 30 years lives with him and splits costs but that point is still really valid.

My son is a couple years out of school living in a 2 bedroom apartment in the nearby city. His monthly apartment total costs exceed my home costs as all i am paying is real estate tax which is half his rent. His utilities are lower but it still doesn't close the gap. I live on 2 acres with 2500 square feet, hes on the second floor of an 8 unit building with ~1000 square feet. You choose.
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LD1515
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Re: What to do with Home Equity

Post by LD1515 »

7eight9 wrote: Sun Jun 28, 2020 8:02 pm Some would advocate never paying off your home ...

Interest only mortgage: the conservative choice?
viewtopic.php?f=2&t=304655#p5036906
THis is a terrific thread ... thank you ... and the exact kind of odd consideration i was looking for ... i hope there is more .... thank you very much ...
1moreyr
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Re: What to do with Home Equity

Post by 1moreyr »

LD1515 wrote: Mon Jun 29, 2020 4:59 am Bio ... me age 53 ... wife age 53 ... sold business 2 years ago ... 2 children (one 24 and off the payroll (thank God) ... other 19 in college paying full
retail for tuition etc)

both scaled back working 2 years ago ... downsized our life/expenses accordingly to regain some peace ... will take occasional project
here and there ... those projects do not come by often but if/when they do we pass on most ... because we continue to pass, future
opportunities will probably come along less often

do not expect to have to financially contribute to our parents care

Finances ... 2 m taxable ... 1 m traditional IRA

thank you again ... looking forward to any/all responses ...

Are you saying you are effectively in semi retirement? only working once in a while? if that is correct, that is all the more reason to NOT play with the equity in your home. At least in my opinion.
bberris
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Re: What to do with Home Equity

Post by bberris »

The biggest tax advantage from house ownership is when it is fully paid off. The deduction for interest paid on a house note is limited; you only get the benefit that exceeds the standard deduction. If you borrow on your house equity, you have to pay tax on the return you get from the investment. If you don't borrow, you get a tax-free return on the money you would have earned.

Another way of looking at it as rent vs buy. Buying a fully paid house gives you the tax-free return of the rent you would have paid. I believe some countries actually tax imputed rent.
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22twain
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Re: What to do with Home Equity

Post by 22twain »

LD1515 wrote: Mon Jun 29, 2020 4:59 am Finances ... 2 m taxable ... 1 m traditional IRA
So the 150K you could pull out of the house amounts to about 5% of your net worth. Seems to me this scheme is unlikely to ruin you if it goes bad, but the amount is small enough as not to make it worth the trouble (to me, anyway).

5% * (expected return - interest on HELOC) = a small fraction of 1% relative to your total assets.
Help save endangered words! When you write "princiPLE", make sure you don't really mean "princiPAL"!
Grogs
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Re: What to do with Home Equity

Post by Grogs »

LD1515 wrote: Mon Jun 29, 2020 4:32 am
runner3081 wrote: Sun Jun 28, 2020 7:16 pm Thinking too hard.
I suspected that ... thanks for the wake up call ...
I'd say a big question is how did you come to own your home free and clear? I just paid off my home in January and I can't imagine the idea of turning around and taking out another mortgage. The only circumstance I would consider taking a HELOC would be as an extended emergency fund. I figure I could get about 3 years of expenses (including the payments) from a 50% LTV HELOC and that would be less painful than having to liquidate stocks at a big loss.
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bottlecap
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Re: What to do with Home Equity

Post by bottlecap »

Even if you get a loan for 2.5%, that’s a hefty expense ratio. Why would you want to take out a loan to invest?

JT
Rudedog
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Re: What to do with Home Equity

Post by Rudedog »

Bad idea. I would never borrow against the equity in my home. You're betting on the spread between the interest on the debt and possible earnings.. Enjoy your debt-free home. 8-)
grok87
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Re: What to do with Home Equity

Post by grok87 »

Starfish wrote: Sun Jun 28, 2020 8:20 pm Pretty much everybody has a mortgage AND money invested in the market at the same time. I don't see the problem.
I have no intention to sell my investments to pay off my house although I could.
I think it is often a good goal to have your mortgage paid off or defeased by the time you retire.

By defeased i mean that you have the funds to pay off your mortgage but invest them in high-quality cash-flow matched bonds instead.

For example if your mortgage has 10 years left to run and the payments are $9k a year, you could have a 10 year treasury strips ladder with $9k for each rung.

cheers,
grok
RIP Mr. Bogle.
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ofcmetz
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Re: What to do with Home Equity

Post by ofcmetz »

In your situation, I see no reason to borrow against your home. Yeah, maybe you could do better, but you could also do a whole lot worse. I would keep the equity there and only pull it out in a dire financial emergency.
Never underestimate the power of the force of low cost index funds.
gobimanchurian
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Re: What to do with Home Equity

Post by gobimanchurian »

HELOC is like a credit card, only here, you have your house as collateral.
If you are looking for ability to use the cash when needed (not now) get a HELOC.
However, like most others suggested "proceed with caution".
If your mortgage is at 4% and your investments make you 7%, why not invest for 7% than pay off your house.

Refinancing your mortgage requires you to pay government fees which can be quite a bit. So be careful which one you choose.
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AerialWombat
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Re: What to do with Home Equity

Post by AerialWombat »

You have $3 million and a paid off house. You’ve won the game, so stop playing. Go enjoy your retirement.
av111
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Re: What to do with Home Equity

Post by av111 »

Scatterbrain wrote: Sun Jun 28, 2020 9:36 pm If your income is stable and you have ample reserves, I don’t see anything wrong with levering up to 50% LTV or so to invest in a diversified fund IF you have a fairly long investment horizon for the money.
Yes the income is stable and there are ample cash reserves. It feels really expensive to take out cashout refi on investment property at 4.875%.
AV111
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Sandtrap
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Re: What to do with Home Equity

Post by Sandtrap »

OP:
Hypothetical question for you.

Suppose you had an equity loan for $500,000 at 2.5% interest.

Suppose you had invested that on or prior to February 20, 2020 at the market peak.

How would you have felt 30 days later when equities dropped 30% with an unknown recovery time and unknown whether it was going to even drop further?

If it took 2 years to recover equity valuations, how long after that would you have made up for the 2.5% equity loan interest as well as the loss of principle?

Thoughts?

j :happy
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huskerfan1414
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Re: What to do with Home Equity

Post by huskerfan1414 »

LD1515 wrote: Mon Jun 29, 2020 4:59 am First of all ... WOW .... thank you all very very much for your feedback ... a quick summary of comments so far are

- Roughly 80-85% ... some version of "thinking too hard" ... invest any proposed mortgage payment into VG index fund of some flavor and go back to sleep ...

- Remaining 15-20% ... need more personal info ... pulling money out to invest may make sense under some circumstances ... ok ... here goes

Bio ... me age 53 ... wife age 53 ... sold business 2 years ago ... 2 children (one 24 and off the payroll (thank God) ... other 19 in college paying full
retail for tuition etc)

both scaled back working 2 years ago ... downsized our life/expenses accordingly to regain some peace ... will take occasional project
here and there ... those projects do not come by often but if/when they do we pass on most ... because we continue to pass, future
opportunities will probably come along less often

do not expect to have to financially contribute to our parents care

Finances ... 2 m taxable ... 1 m traditional IRA

thank you again ... looking forward to any/all responses ...
Dude, you've won the game.
Don't get back into the game.

Think of it this way: instead of being envious of others who might be increasing their net worth with more investing, realize people like me are doing so to get into YOUR position.
The more I learn, the dumber I feel.
LittleMaggieMae
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Re: What to do with Home Equity

Post by LittleMaggieMae »

I can see having a HELOC open on a paid off house - it's an inexpensive way to access money for short periods of time. And it offers flexibility for big expenses (a new roof? a new vehicle? being able to take advantage of an opportunity more or less on the fly).

I think there's a lot of unanswered questions that need to be answered before deciding to take out a new mortgage and then "investing" the money.
Is there sufficient household income? What "opportunity costs" are there to using income for the mortgage versus something else? How far from retirement? Is retirement funded/secure?

I don't quite get the hurry to "having a paid off house is wonderfully great! I own it!" - since even a paid off house can still be lost (or loose much of it's value) - if property taxes aren't paid, if insurance isn't paid (and some disaster happens) and if it isn't maintained inside and out and maybe occasionally updated over the decades of ownership. I can see having a paid off or nearly paid off house as one enters "retirement" as it's a "badge" of accomplishment.
babystep
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Re: What to do with Home Equity

Post by babystep »

LD1515 wrote: Mon Jun 29, 2020 4:59 am First of all ... WOW .... thank you all very very much for your feedback ... a quick summary of comments so far are

- Roughly 80-85% ... some version of "thinking too hard" ... invest any proposed mortgage payment into VG index fund of some flavor and go back to sleep ...

- Remaining 15-20% ... need more personal info ... pulling money out to invest may make sense under some circumstances ... ok ... here goes

Bio ... me age 53 ... wife age 53 ... sold business 2 years ago ... 2 children (one 24 and off the payroll (thank God) ... other 19 in college paying full
retail for tuition etc)

both scaled back working 2 years ago ... downsized our life/expenses accordingly to regain some peace ... will take occasional project
here and there ... those projects do not come by often but if/when they do we pass on most ... because we continue to pass, future
opportunities will probably come along less often

do not expect to have to financially contribute to our parents care

Finances ... 2 m taxable ... 1 m traditional IRA

thank you again ... looking forward to any/all responses ...
With that level of assets, it will not make much difference whether you invest the home equity or not. I would think about the risk and reward.
Let us say you take out 100k at 3% for 20 years.

Let us look at rewards.
You invest in VTI and say returns are 7% over the next 20 years. Some would argue that 7 is high and it should be more like 6. 100k * (7% - 3% mortgage) at 18 years would be 200k. How much additional 100k matters? If your 3M is invested with 60/40 then it will double to 6M in 20 years. Does that additional 100k matter?

Let us look at the risk.
Let us say the market goes down by 30%, 100k becomes 70k in a few months. What are you going to do? Stick with it? Sell the VTI? You will also see your 3M going down to 2.4M. What do you do?

Again, think about the risk and reward.
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Sandtrap
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Re: What to do with Home Equity

Post by Sandtrap »

huskerfan1414 wrote: Mon Jun 29, 2020 9:38 am
LD1515 wrote: Mon Jun 29, 2020 4:59 am First of all ... WOW .... thank you all very very much for your feedback ... a quick summary of comments so far are

- Roughly 80-85% ... some version of "thinking too hard" ... invest any proposed mortgage payment into VG index fund of some flavor and go back to sleep ...

- Remaining 15-20% ... need more personal info ... pulling money out to invest may make sense under some circumstances ... ok ... here goes

Bio ... me age 53 ... wife age 53 ... sold business 2 years ago ... 2 children (one 24 and off the payroll (thank God) ... other 19 in college paying full
retail for tuition etc)

both scaled back working 2 years ago ... downsized our life/expenses accordingly to regain some peace ... will take occasional project
here and there ... those projects do not come by often but if/when they do we pass on most ... because we continue to pass, future
opportunities will probably come along less often

do not expect to have to financially contribute to our parents care

Finances ... 2 m taxable ... 1 m traditional IRA

thank you again ... looking forward to any/all responses ...
Dude, you've won the game.
Don't get back into the game.

Think of it this way: instead of being envious of others who might be increasing their net worth with more investing, realize people like me are doing so to get into YOUR position.
Great points!
I really needed to hear this one as well!

j :happy
Wiki Bogleheads Wiki: Everything You Need to Know
MadHungarian
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Re: What to do with Home Equity

Post by MadHungarian »

What to do with home equity?

Live in it.
quantAndHold
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Re: What to do with Home Equity

Post by quantAndHold »

53 and semi retired, so not a lot of human capital left in the tank.

All the more reason to NOT spin up another mortgage.

Also, $3M in the portfolio, living in a LCOL area. You’ve won the game. Stop playing. Seriously.
Yes, I’m really that pedantic.
BrooklynInvest
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Re: What to do with Home Equity

Post by BrooklynInvest »

Thinking too hard ;-)

From what you've said it's hard to imagine the marginal benefit of investing the $200k would be more than the marginal cost and hassle.

Congratulations on winning the game!
desiderium
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Re: What to do with Home Equity

Post by desiderium »

I have looked at this problem myself. Like you, my house is paid off. Unlike you, with ~6% of net worth tied up in home equity, I have ~50% in my house (VHCOL city). Like you, my liquid assets are enough, or close to enough.

I got here in part by keeping costs low, getting rid of my FA, investing in low cost funds and swearing off fees and interest paid to banks. So paying for a mortgage feels like a gift to a large financial corporation.

There are lots of ways to leverage investing. 2X or 3X equity ETFs, buying on margin, futures, options etc. I read about these with some interest but remain content with a relatively simple passive investing strategy.

If you own bonds, which pay nothing now, you can just exchange them for stocks. I have a conservative asset allocation, approximately 50/50. I "missed out" on the run up over the last decade. Sure, it made me feel dumb at times. But I am edging closer to retirement and I remember what 2008 felt like, so I stick with my plan.

FOMO is powerful, especially if, like me, you pay too much attention to the markets. Your imagined investing gains could turn out to be big losses anyway. Enjoy your prosperity and a good night's sleep.
Jags4186
Posts: 5119
Joined: Wed Jun 18, 2014 7:12 pm

Re: What to do with Home Equity

Post by Jags4186 »

The $200k locked up in your house is paying you in the form of free rent.

Let’s pretend you took out all $200k equity and had a 30 yr mortgage with a payment of about $875/mo. You now have a $10,500/yr bill to pay and $200k.

Does not seem like a great bargain to me.
Starfish
Posts: 1982
Joined: Wed Aug 15, 2018 6:33 pm

Re: What to do with Home Equity

Post by Starfish »

grok87 wrote: Mon Jun 29, 2020 8:14 am
Starfish wrote: Sun Jun 28, 2020 8:20 pm Pretty much everybody has a mortgage AND money invested in the market at the same time. I don't see the problem.
I have no intention to sell my investments to pay off my house although I could.
I think it is often a good goal to have your mortgage paid off or defeased by the time you retire.
I completely agree - with the paid off part - for CAGR/risk and tax reasons.
But the main point is "by the time you retire". If you are not close to that, there is no reason.
Topic Author
LD1515
Posts: 7
Joined: Sun Jun 28, 2020 5:27 pm

Re: What to do with Home Equity

Post by LD1515 »

OK ... WOW WOW ... thank you again for everyone's useful insight ... I'm beginning to understand BH stuff better ... and I hear you loud and clear ... thank you

90%+ of the feedback has been some form of ... just sit there ... do nothing and be grateful you dumba** ... which I gratefully accept ... I was leaning that way to begin with but at least it's been confirmed by the smarter people than me

but there has been at least one different/interesting (although maybe unsuitable for me) idea that I'd appreciate hearing back on

one of the earlier threads on this discussion kicked around taking an interest only loan on the house (not sure if they are easy to get) ... current rates extremely low ... essentially becoming my own tenant ... free up my own capital ... invest the capital reasonably well (paying taxes on those gains) ... itemize, write off the loan interest payment and at the end of the interest only loan period do one of the following

sell house
refinance the house
payoff the loan

any merit to this general idea ... given current interest rates ... thanks in advance
Topic Author
LD1515
Posts: 7
Joined: Sun Jun 28, 2020 5:27 pm

Re: What to do with Home Equity

Post by LD1515 »

Sandtrap wrote: Mon Jun 29, 2020 9:29 am OP:
Hypothetical question for you.

Suppose you had an equity loan for $500,000 at 2.5% interest.

Suppose you had invested that on or prior to February 20, 2020 at the market peak.

How would you have felt 30 days later when equities dropped 30% with an unknown recovery time and unknown whether it was going to even drop further?

If it took 2 years to recover equity valuations, how long after that would you have made up for the 2.5% equity loan interest as well as the loss of principle?

Thoughts?

j :happy
i would feel awful ...
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