Homes As ATM’s

Not anymore but that certainly isn’t by choice.  It is hard to get cash out of your home due to the amount of equity that is required in a home.  For a regular Conventional loan you typically can’t go above 80% loan to value (have to have 20% equity) and with a home equity line of credit it is around 70% loan to value. 

Taking equity out of your home for remodeling, improvements, investments, and paying down debt can be okay depending on how it’s used with each.  Just as I recently posted, renovations aren’t adding value to homes as much as they used to.  You don’t want to invest the equity into something risky, always consult a financial planner.  And when it comes to paying down debt you need to make sure it’s really saving you as much money as you think since your new payment is most likely based on 30 years. 

I think banks should somehow restrict how the money is used.  I am not sure exactly how you do that but for instance if someone is paying off credit card debt they should require the borrower to sign something at closing that will be sent to the credit card company with the payment stating they are closing the credit card account.  We just don’t have self-control and if that credit card is still open there is a good chance that you will use it again. 

The bottom line is be careful what you use this money for from your home. 

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