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>they can walk into a ba[n]k and walk out with a HELOC. My house appreciating 100k this year means, potentially, that I get to spend 100k this year. No it does
by MontyCarloHall 4y ago
>they can walk into a ba[n]k and walk out with a HELOC. My house appreciating 100k this year means, potentially, that I get to spend 100k this year.
No it doesn’t. It means you can take on an additional $100k of debt this year. HELOCs are not free money, no matter how much the banks want to convince you this is the case.
- ElevenLathe 4y agoYes, debt is money I get to spend now. That's why I borrowed it. If I didn't have anything to spend it on, I wouldn't borrow.
- MontyCarloHall 4y agoNo, debt is money you get to spend now and pay back later. You haven’t actually net gained any money by taking out that HELOC, unless you manage to wisely invest it with an ROI higher than your interest rate.
- ElevenLathe 4y agoThat's the point: I wouldn't gain any money by not taking the loan either. I gained the "money" (wealth, really) by my house appreciating in value. Anyway I'm not advocating that everybody borrow against every shred of equity in their house, just noting that this temptation exists. If my house is worth more suddenly, my spending can increase suddenly, without my even having to move. Whether or not this is wise is a separate discussion.