If your equity wealth has you perusing loan company
fliers and dreaming of exotic vacations, "resist
the urge," says David Reed, author of "Mortgages
"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,"
"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.