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October 20, 2007


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I'm in the 'who'd do that, its so dumb camp'. I think I'm the sort of person who would hate to get a personal loan, and that's what this would feel like.

Beats renting!

Actually, MW, I think there are a lot of times when renting is the best option. Depends on where you're living, I guess. DC rents (where I live) are high, but we were able to find a place with comparatively lower ones. I have friends who rent a house in Central PA for 600/mo. They couldn't afford to buy one yet, but they still get the comfort of a (little) house. :-)

I'm in the "don't borrow against your house" camp. I know one blogger, Nina at Queercents, who has a HELOC in reserve for emergencies. As long as she keeps it as such, that makes better sense than actively using it.

Yes, there are definitely times and places where renting beats owning. But in the long run, owning is usually the better option, especially if your housing is modest.

For low earners, owning a modest home can well represent the long-term difference between enjoying a modest retirement and never being able to retire at all because you'll always have to pay rent.

There are only a few reasons for doing it, emergencies, home improvements, other investments, and spending down later in retirement, and even then you have to use commonsense about it

I don't think you should use a home equity loan for anything, unless you are facing an otherwise devastating financial situation. The "good" uses seem suspect., did you expect your kid to get a full scholarship only to discover 18 years later he was dumb as rocks? Why didn't you save for this? 2 years community college + 2 years state college doesn't cost THAT much (yet).

Home Improvement...seems a little weird to take out a loan and pay interest, just to build more equity into your house. Sure, you could sell the house and reap the benefits (hopefully) but otherwise you're still just paying to borrow money. And now you've got this interest payment eating into your equity gain. Yuck. Why not save, earn interest, and pay cash? What kind of improvement can't wait a few years?

Medical bills...I suppose if it comes between collection calls and a home equity loan, the loan wins, but you should be building an emergency fund to cover at least some of things like this.

HELOC...a low interest revolving line of credit with collateral (your house) is still just a credit card.

Wish I had known this five years ago.

Borrowing at low rates to invest in appreciating assets is very worthwhile as long as the rates are really low and the assets will really appreciate more as a result. It is the basis of high power leverage to maximize returns. It doesn't make much sense if the rates are subprime, only you appreciate the investment, or you have little flexibility and have to sell it in a down market.

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