The right (and wrong) reasons to tap home equity

[GSU4LIFE]

NEW YORK (Money) -- Question: I cashed in my investments to raise a 25% down payment to buy a house. I'm thinking of taking out a home equity line of credit, borrowing against it and then investing the loan proceeds. I figure this would be a good way to rebuild my investment portfolio. What do you think? - James

Answer: I think it's a good idea to open up a home equity line of credit that you can borrow against in the event of a financial emergency - a layoff, say, or to pay for a large expense you can't handle out of savings or cash flow.

http://money.cnn.com/2006/10/16/pf/expert/expert.moneymag.moneymag/index.htm

 

[Da_Sperm]

NEW YORK (Money) -- Question: I cashed in my investments to raise a 25% down payment to buy a house. I'm thinking of taking out a home equity line of credit, borrowing against it and then investing the loan proceeds. I figure this would be a good way to rebuild my investment portfolio. What do you think? - James

Answer: I think it's a good idea to open up a home equity line of credit that you can borrow against in the event of a financial emergency - a layoff, say, or to pay for a large expense you can't handle out of savings or cash flow.

http://money.cnn.com/2006/10/16/pf/expert/expert.moneymag.moneymag/index.htm

I say your equity should be left alone. It is not a good idea to TAP into the equity of your primary residence.

 

[ABE]

I have seen people get the equity out of their homes to disastrous results...

Some tried to use it to buy properties for flipping, rehabbed the house, and got stuck with it. No buyers, so renters, but a mortgage, a line of credit note, and utilities, and insurance for a second home.

 

[Da_Sperm]

I have seen people get the equity out of their homes to disastrous results...

Some tried to use it to buy properties for flipping, rehabbed the house, and got stuck with it. No buyers, so renters, but a mortgage, a line of credit note, and utilities, and insurance for a second home.

That is why I say you don't use the equity in your primary house to do anything. If anything, I would use the equity of a rental property to try some other investments.