As a real estate investor, we classify it as a bad idea If you have a large amount of equity tied up in your home. That’s called using your home as a bank and a home is not a good bank. Maybe you’ve heard Jason say it and here are the reasons why. While it sits in your house as a sort of de facto savings account, that money is being eaten alive by inflation at the prodigious rate of 4% annually (if you go with the government number) or 10% or more (if you go with real world conditions).
That means that every dollar of equity sitting in your house is losing value at the rate of at least 4 cents per year. To put that in stark perspective, let’s say you have $100K of unused equity that has been sitting in your home for 10 years losing value at the rate of 4% per year. That means the purchasing power of that $100K has now dwindled away to only $60K!
That ought to make you sit up and take notice.
You need to pull that equity out of your house and put it to work in as prudently leveraged debt that allows you to actually create wealth during inflationary times. In case you were wondering, our Empowered Investor economic forecasters don’t predict inflation to be going away, well, ever. President Nixon’s unpinning of the value of the dollar from gold in the early 70’s put the final nail in that particular coffin. Unless monetary policy changes significantly in the future, there is no reason to believe the dollar will ever strengthen appreciably.
Which makes it more crucial than ever for you to get your equity out of your home and put it to work making you wealthy even in today’s economy.
