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The changing market


The real estate "boom" is over, experts say. With change comes both risk and opportunity.

Ballooning equity doesn't mean you're rich
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Fighting temptation
If your equity wealth has you perusing loan company fliers and dreaming of exotic vacations, "resist the urge," says David Reed, author of "Mortgages 101."

"Take it easy, take a deep breath," he says. "If you have an accountant or financial adviser, talk to them about it."

A few common, good reasons to tap your equity: college tuition, medical bills and job loss. But you always need to investigate the alternatives, too. Using equity for college tuition is not always a smart financial move, says consumer advocate Ilyce Glink, author of "50 Simple Steps You Can Take to Sell Your Home Faster and For More Money in Any Market."

"I'm always concerned about putting your house at risk," she says. Look at the student and parent loan programs and the cost, so that you can at least compare your options, Glink says.

Many financial professionals recommend viewing equity as a money source of last resort.

"Equity in your home can be viewed as a safety device," says Jack Guttentag, professor emeritus of finance at the Wharton School of Business and author of "The Mortgage Encyclopedia." It should be considered, "a fallback -- a source of funding for emergencies," he says. "One of the potential emergencies is that you lose your job. You're suddenly faced with a situation where you can't make the payments."

If you find yourself tempted to borrow against your equity, Tyson says, first, take a look at your personal finances and your savings goals. "Most people don't do that analysis and are under-savers rather than over-savers," Tyson says.

"It's always better to have it and not need it than need it and not have it," says Reed. "If you look at your equity more as a financial insurance policy than an ATM, you're probably looking at it right."

Dana Dratch is a freelance writer based in Atlanta.

-- Posted: March 1, 2006
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