• Separating Equity From Your Home -
• HELOC Borrowers in the Midwest Need to be Very Cautious -
• HELOC Interest Traps to Watch Out For -
• Pause or Peak? HELOC Borrowers Should Reconsider Move to Fixed Rates -
• Internet HELOC Rates - Cutomer Beware -
• Getting Home Values Online for HELOC Borrowing -
• Paying for College With a HELOC - Remember this Extra Step -
• A Great Tool for Determining Home Value - www.zillow.com -
• How a HELOC Can Help Boost Social Security Benefits -
• HELOC Rewards? -
• Using a HELOC as a Bridge to a Reverse Mortgage -
• Avoid High Reverse Mortgage Fees -
• Why Making Only Minimum Payment is a Losing Strategy -
• Order of Loan Payments is Important -
• Credit Card Advantage - Buy Car With Credit Card -
• Best HELOC and Best HELOC Rates - Guide to Finding Both -
• Seven Ways Home Equity Can Boost Your Retirement -
• Decision Time: Home Equity Loan or HELOC? -
• 10 Things to Look for in a HELOC Loan -
• 5 Tips for Savvy Use of Your HELOC Loan -
• Use HELOC Loan to Avoid Universal Default Clause -
• Consolidating loans with a HELOC -
• Using Home Equity to Buy a Car -
• HELOC Loans Can Help Retirement Planning if Carefully Used -
• Invest Home Equity - HELOC Arbitrage -
• HELOC Advantages - Income Smoothing -
• Using Home Equity to Buy Another Home - HELOC for Downpayment -
• 15 Year Mortgage - How HELOC Loan Can Help Make a Shorter-term Mortgage Doable -
• Reverse Mortgages - Compare Home Equity Loan With Reverse Mortgage -
• Early Retirement - How a HELOC Loan Might Help -
• HELOC Mortgage - Replace First Mortgage with a HELOC Loan? -
• Credit Card Reward - Use Your HELOC Loan to Maximize Rewards -
• 0% Balance Transfer Use With HELOC -
• Gift Cards - Use HELOC to Leverage Gift Card Discounts -
• Insurance Deductible - Use HELOC to Save -
• Insurance Deductible - Use HELOC to Save -

Accumulated home equity is the single biggest asset for most American households. Growing home equity by making a bigger downpayment, extra mortgage payments and by minimizing home equity borrowing is a time-honored mantra of “good” personal finance management. But is keeping home equity illiquid in the home really a good financial move?

We recently came across this report (really a sales piece) that presents some though-provoking arguments as to why homeowners might be better off separating their equity from the home and converting it to liquid, secure investments. The basic premise of the report (supported by a well-done illustration of two brothers taking different paths) is that a homeowner who follows a strategy of maximizing tax-advantaged mortgage debt - by making minimum downpayment, interest-only payments, maximizing term of loan, etc. - can invest the funds that would have gone toward principal retirement and come out way ahead of a borrower who strives to pay down the mortgage as fast as he can.

Other key assertions include:

• carrying a large mortgage balance places you in a better position vis a vis the lender in the event of foreclosure;
• liquifying home equity protects you in the event of job loss or natural disaster that might make equity inaccessible;
• idle equity locked-up in the home is subject to housing market risk and yields no return - i.e. the value of a home can rise regardless of equity separated from the home;
• having too many eggs in the idle home equity basket equals poor asset diversification;
• the tax deductibility of mortgage interest makes profitable arbitrage opportunities relatively easy to find.

To a large degree, many of the central points in this report rely on the assumption that homeowners following this strategy will behave rationally and systematically - e.g. the net funds made available from a lower monthly mortgage payment will be diligently invested. We suspect many (most?) typical homeowners would find it very difficult or impossible to be so diligent in the long-run. The reason this strategy may work well for the “affluent” homeowner is that they have other resources to rely on. For the average homeowner, home equity is the most cost-effective way to borrow big sums of money - not for investment arbitrage - but for important everyday needs like a new roof or college for the kids.

This website focuses on ideas and tips for tapping home equity (through the HELOC mechanism) in a measured manner for prudent uses. We do not promote the gung-ho withdrawal of equity for investment arbitrage puposes. But regardless of whether you fully agree with the thesis of this report (”homes are designed to house families, not store cash”), the authors (Steve Marshall & Mike Lowe of Bellevue Mutual Mortgage) do make many good points that are worth mulling over. Overall, it is a well-written document worth taking 20 minutes to read.