Years ago, people used to have Mortgage Note Burning parties. This was way back when people thought it was a good thing to have their mortgage paid off. Yup, they used to think that, can you believe it?
These days, there are any number of people out there that would like nothing better for you than to be leveraged to the hilt. They'll say things like - "Equity has a zero rate of return" and "If you're sued and have a lot of equity, you can lose it.
Pay no attention to those "wizards" behind the curtains. Look - if you happen to be wealthy, you have many options on where to put there investment funds. You probably come across high riding investments frequently and when you borrow money to fund that investment that is simply an arbitrage strategy. Banks do it every day. If your rate of return from the investment exceeds your "cost of capital", you win. But for average homeowners, a better strategy is to pay down your mortgage as fast as you can.
If you're a baby boomer, there's a good chance your parents have paid of their home completely. Ask them how they felt the day they received their satisfaction letter. More than "satisfied", I'll tell you that! Today, it is often said that it's a "new world" and investment strategies need to change with the times. Right... don't buy Woolworth. Or K-mart. But heaven forbid, please don't let anyone convince you that paying down debt isn't a good thing.
Now... all that being said... I do implore you to consider an equity line at this time if you don't already have one. Why? Because real estate values are dropping in many parts of the country. What does one thing have to do with the other? Well, let's just say that in the very near future, you lose a job. Or become pregnant. Or have to sell the house because of some unforeseen circumstance.
In many of these instances, (and other unplanned events) having access to capital can be critical. So let's say that down the road, you need to pull some equity out of your home for whatever. What if the real estate slump gets very bad and we see values decline by 20%, 30%? Wait... that can't happen, can it? It did. In the early 1990's values dropped all over the country but especially in the northeast. On Long Island in NY, values plummetted approximately 25%. Even if there is just a small outside chance that it could happen again, wouldn't it be nice to know that you have an equity line already in place? Even if you don't need it - it's there just in case.
Don't be quick to say that it can't happen again. It can. Anything can happen. That's why you have insurance. And having access to an equity line is a form of insurance. You can have access to cash and it doesn't cost you a penny until you use it! I mean, what could be better than that?
When applying for an equity line, get a broker that has access to mortgage products from big banks like Citibank, Chase, Wells Fargo, Bank of America. These big players usually have equity lines available with little or no out of pocket expense and you can usually borrow at or close to the prime rate.
