“â€¦think about approaching a financial institution and investing further in your home’s inherent value – chances are you’ll be pleasantly surprised with the result.”
With the holiday season in full swing, this is the perfect time of year to engage in a brief discussion regarding illiquidity.
The vast majority of homeowners hold their assets principally in a house and in a retirement account. While both asset sources provide important tax advantages, a home offers the additional virtue of shelter. However, both sources are considered illiquid, that is, their equity cannot be readily tapped into. For a retirement account, penalties and tax consequences come into play for withdrawing funds. For a home, only its sale offers immediate access to an unrestricted financial account.
So how does one gain access to their piggybank to fulfill their wishes of their loved ones during this season of giving? In many cases, borrowing against the equity in their homes – in essence increasing their mortgage balance – results in fattening up the piggybank via an equity line of credit.
Interest rates for lines of credit are very, very low. Compared to interest rates for credit cards, there simply is no comparison. As we participate in this wondrous time of year that for many people results in major financial hangovers each January and beyond, think about approaching a financial institution and investing further in your home’s inherent value – chances are you’ll be pleasantly surprised with the result.
Happy holidays everyone!