Re: borrowing against home equity

From: John Leipold <jleipol@ibm.net>
Subject: Re: borrowing against home equity
Date: Fri, 01 Jan 1999 12:15:10 -0500

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The biggest disadvantage I can think of is that while you may
temporarily reduce your interest rate, at the same time you may not be
solving the real problem.

If your borrowing was because of temporary setbacks, that's one thing. I
don't know if this was your case or not, but usually borrowing money
from retirement accounts or off of credit cards is a sign of bigger
problems: living beyond your means.

The very foundation of retirement planning, the heart & soul of any
saving-for-the-future plan is living on less than you earn. If you have
a pattern of continual borrowing, then while a home equity loan might
temporarily reduce your total monthly payout, it will also jeopardize
your home ownership if you again begin to borrow on credit cards or from
your retirement account to pay for new "needs".

If a home equity loan is part of a coordinated plan whereby level of
indebtedness is decreased, and continues to decrease, then I would see
no problem with doing it (as long as you read & understand all the fine
print)(don't be afraid to ask questions).

I would seriously examine the big picture before you do more spending
and/or borrowing. An excellent web resource on this is at
http://www.fool.com/School/13Steps/13Steps.htm 

Best wishes for 1999,

John Leipold


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