Russ Gaiser III, one of our financial advisors, wrote an article for TheStreet regarding the idea of borrowing against your home for investing in low-interest-rate environments. Russ explains that while rates are at an all-time low and the markets are showing little signs of slowing down, the idea of borrowing against your home for investing could seem like a good idea. However, he exclaims that it’s wiser to take a step back and consider all of the variables that go into making a hasty choice. He lists some key factors that need to be considered.
Close to Retirement
A factor to consider is retirement age. If you are close to retirement, minimizing debt is better than borrowing. As you close in on retirement, making sure you don’t have debt such as a mortgage is can be beneficial to a comfortable retirement.
Other Investments
Do you have a 401(k) plan or a Roth IRA? If you have accounts such as these and they have been neglected, it would be wise to develop a plan to start contributing to those accounts. A long-term, consistent investment plan is crucial to long-term financial success.
Goals
Goals are essential to have, especially regarding your financial success. You should ask yourself, “Does this strategy have an end goal?” You may have many goals, from owning your dream car to going on a lavishing vacation. Be sure to clearly understand your financial position that could work for your goals.
Risk
Risk is typically the last thing people think of when borrowing against your home. However, it’s important to know all the risks of investing. For instance, if you did borrow against your home and realize you can’t make payments on this new mortgage, you could be at risk of foreclosure. That could add another layer of stress to your financial situation, even worse if you are on the cusp of retiring.
Before making any hasty moves, be sure to have a clear head and a firm grasp of your financial situation. You worked are for your money and paid off your mortgage. Think clearly before putting yourself back into the hands of a lender.
To read Russ’s full article on TheStreet, click here.
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