Florida Mortgage Advice: When Should You Tap Equity?

Attention, Florida mortgage holders: Are you unsure about when you cash out and/or tap your home equity? Listen to this advice…
If you have equity in your home, you’re probably eligible to borrow against it by taking out either a Florida home equity loan or a home equity line of credit (HELOC).

Here’s when the move can be smart:

When Florida home loan rates are low, and you want make equity-boosting improvements to your home, borrowing against your equity can be a smart move because you’ll be adding value to your home and will able to deduct the interest on the money you borrow to do so.

It also can pay if rates are low, and you possess a lot of high-rate credit card debt that you want to pay off, assuming you’re only using a small amount of home equity and don’t plan to run-up your plastic again.

A HELOC can also augment your emergency fund — especially if you’ve paid off most of your first Florida mortgage loan and are about to retire. With a HELOC, you don’t owe any money on it unless you draw against it.

However, here’s when the course of action is not recommended:

Borrowing against your equity means you put your house at risk of foreclosure if you can’t pay back what you owe with interest. So don’t do it if:

• You habitually run a high credit card balance or have a hard time meeting your monthly payments. If you’re so stretched that you need home equity to pay for your daily life or vacations, you should downsize your lifestyle.
• There’s not much difference between the interest rate you can get on your Florida home loan and the rate on your credit card.
• You want to pay off low-rate debt such as a federal student loan. Federal student loan rates are typically lower than those on Florida home equity loans and HELOCs.
• You want money to invest in the stock market.

SOURCE: CNN Money