Ten Reasons to Consider Tapping Home Equity Now

The Federal Reserve has set the wheels in motion and for the first time in nearly a decade, interest rates are on an upward trajectory. The initial hike was a modest one quarter of one percentage point -- not a game changer for most investors or consumers. And from what Fed Chairwoman Janet Yellen telegraphed in her remarks following the mid-December, 2015, announcement, the Fed plans to move with caution and lift rates very slowly over the next few years.

That said, for homeowners contemplating refinancing their mortgages or tapping the value of their home via home equity borrowing, carpe diem may be the message to be heeded.

Positive Sales Trends

Data gathered during the first three quarters of 2015 found that single-family home and condominium sales reached their highest level in nine years. Further, those who sold their homes in the third quarter of 2015 also garnered the biggest price gains in eight years -- an average of 17% over their purchase price.1 Rising home values and historically low interest rates have also stimulated refinancing activity.  According to data reported by The New York Times, refinanced loans represented 42% of lenders' loan volume in September of 2015 -- a 5% increase over August and the highest level reached since May.1

The same trend is in evidence as homeowners are tapping into the equity they have built up in their homes and using the cash for a range of purposes. Here are 10 good reasons to borrow, cited by banks and other types of consumer lenders.

Top 10 Reasons to Consider Tapping Home Equity

1.  Refinance higher-cost debt.

2.  Pay off higher interest credit card debt, then redirect freed-up cash to retirement savings.

3.  Take advantage of potential tax breaks.

4.  Avoid liquidating a solid investment, or better time a capital gain.

5.  Refinance retirement plan loans that would be difficult to repay immediately if employment ends.

6.  Refinance life insurance policy loans that are approaching the cash value.

7.  Enhance liquidity with an emergency fund.

8.  Help a family member with college tuition, a home down payment, or a business start-up.

9.  Stop deferring a significant purchase or project that could be more expensive in the future.

10.  Take advantage of what may be a limited opportunity to lock in an exceptional deal.

If you are thinking of tapping the equity in your home and need a refresher on what type of borrowing vehicle is right for you, consider the following at-a-glance comparison:

Home Equity Loans and Lines of Credit -- What's the Difference?

home equity.png

Keep in mind that historically, home values have gone down as well as up, and a sustained decline could limit the financial options for those with significant loan balances. For more information or to obtain current rate data, contact your banking institution, credit union, or other consumer lender.


1.  The New York Times, "Cashing in on Home Equity," November 13, 2015.

Required Attribution

Because of the possibility of human or mechanical error by Wealth Management Systems Inc. or its sources, neither Wealth Management Systems Inc. nor its sources guarantees the accuracy, adequacy, completeness or availability of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. In no event shall Wealth Management Systems Inc. be liable for any indirect, special or consequential damages in connection with subscriber's or others' use of the content. 

© 2016 Wealth Management Systems Inc. All rights reserved.

Robert J. Pyle, CFP®, CFA is president of Diversified Asset Management, Inc. (DAMI). DAMI is licensed as an investment adviser with the State of Colorado Division of Securities, and its investment advisory representatives are licensed by the State of Colorado. DAMI will only transact business in other states to the extent DAMI has made the requisite notice filings or obtained the necessary licensing in such state. No follow up or individualized responses to persons in other jurisdictions that involve either rendering or attempting to render personalized investment advice for compensation will be made absent compliance with applicable legal requirements, or an applicable exemption or exclusion. It does not constitute investment or tax advice. To contact Robert, call 303-440-2906 or e-mail info@diversifiedassetmanagement.com.

The views, opinion, information and content provided here are solely those of the respective authors, and may not represent the views or opinions of Diversified Asset Management, Inc.  The selection of any posts or articles should not be regarded as an explicit or implicit endorsement or recommendation of any such posts or articles, or services provided or referenced and statements made by the authors of such posts or articles.  Diversified Asset Management, Inc. cannot guarantee the accuracy or currency of any such third party information or content, and does not undertake to verify or update such information or content. Any such information or other content should not be construed as investment, legal, accounting or tax advice.