Your equity is not free money. It is a loan against your own house.
It has a rate, a term and a consequence, and the collateral is the roof over your head. On paper equity looks like a windfall. In real life it behaves like a debt.
That does not make it bad. It makes it a tool. It is genuinely good for a deposit on a second property, for work that raises the value of the first, or for consolidating debt at a genuinely lower rate. Notice that none of those is a holiday.
Values fall as well as rise. Borrow near the top and a soft year can leave you owing more than the property is worth. Orange County median list is down 3.6 percent this year, which is exactly the kind of year people forget is possible.
So borrow against equity for things that return. If the money will not earn more than it costs you, leave it in the wall.
The products are named differently around the world but the risk is identical.
I am not a financial adviser and I will tell you plainly when to go and see one.
The short version
- It has a rate, a term and a consequence.
- The house is the collateral.
- A deposit on a second property.
- Work that raises the value of the first.
- Consolidating debt at a genuinely lower rate.
- Notice that none of those is a holiday.
- Leverage on the way up is leverage on the way down.
Talk it through with Kini
Kini will run it with you on your real budget, anywhere in Orange, Los Angeles, Riverside or San Bernardino County. No charge and no pitch.
Book a consultation or call or text (323) 320-1725. See this month's numbers for your county.