- Home equity has no value until it is captured and converted to - something tangible (cash).  It may take time to repair your bad credit Equity grows as a function of real estate - appreciation and mortgage , but equity has no rate of return. I disagree 100%. I own my home outright. I do not pay mortgage. Therefore, my disposable income is higher than it would be if I had a mortgage. Therefore, my equity IS liquidity. To further disagree, home equity does have a rate of return - you call it appreciation. That's what happens in the stock market, usually called growth, or a CD, usually called interest. Rate of return is the measurement of the increase in value over a period of time.

- Regardless of whether I make a living assisting people in purchasing or - refinancing their home, the facts remain A home is an asset when - you own it outright and a liability when you have a mortgage (the banks - owns the house). Because this is a forum to help people, and people may base their decision on the number of voices who say to do X (instead of Y), I will point out that every reputable finance publication I have read on this subject counts one's mortgaged home as an asset, while the balance remaining on the mortgage is factored in as a liability.

- Home equity has no value until it is captured and converted to - something tangible (cash).  Equity grows as a function of real estate - appreciation and mortgage , but equity has no rate of return.

I don't know if you're playing with words to convey a particular philosophy or not, but real estate appreciation is extensively discussed and used to decide whether to rent or buy. Home equity, AFAIC, most certainly be said to have at least an /estimated/ rate of return.

As for the liquidity of stock (without taking a loss) vs. the liquidity of a house (without taking a loss): The distinction is important but not all that big. There is generally a market for houses, as long as they're at the right price. Same for stocks. The question is how much loss one can tolerate on each.

- You need to read my posts again, because I have not advocated - mortgaging the poster's home 100%, his financial planner did.  (I can - only imagine that his financial planner is a believer of seperating - equity in placing it a tax advantaged side investment).

- I am sorry that you (and others) are so strongly opposed to maximizing - the only real tax deduction  allowed to non-business owners.  Uncle Sam - subsidizes the home investment (mortgage tax deduction), and I am of - thought that we should maximize these incentives whenever possible.

Parsing the above statement is very difficult.

Speaking strictly of the dollar figures, the fact is that taking out a personal home mortgage just to get the tax deduction is /not/ always financially advantageous.

In article <1136472072.128675.247@g47g2000cwa.googlegroups.com-,

 "$cott" <ezmortgagelo@aol.com- wrote: - I am sorry that you (and others) are so strongly opposed to maximizing - the only real tax deduction  allowed to non-business owners.  Uncle Sam - subsidizes the home investment (mortgage tax deduction), and I am of - thought that we should maximize these incentives whenever possible. - This has no bearing on my profession, it just makes good fiscal sense. Like all recent B-school grads, you are very good at running the maximization calculations.  But that is only 1/2 of the story.  The other side of the equation is risk.  This is actually a mini-max problem, not a simple maximization calculation.  You want to maximize return while minimizing risk.  Those who have a significant asset base can modify this to maximize return while controlling risk.

If you don't factor in risk, you end up bankrupt.  Like Dave Ramsey says, foolish with zeros on the end.  Someday your wisdom gained through age and experience will catch up with your B-school learning, and you will understand all of this.

Until then, please don't advise average people to play casino with their one and only asset, which is home equity.  A home is something that keeps your family warm and dry, not something you gamble away in Las Vegas.

-john-

-- ====================================================================== John A. Weeks III           952-432-2708            j@johnweeks.com Newave Communications                         ======================================================================

"$cott" <ezmortgagelo@aol.com- wrote in news

- There difference is liquidity.  A stock certificate can be liquidated - regardless of circumstances, home equity can not. I look upon lack of liquidity as a desirable feature. The time and trouble it would take to sell makes me stop and think and prevents me from selling to get quick money for a foolish purpose that I would regret after cooling a off period.

$cott wrote: - As this thread was originated by the poster under the guise of - consolidation, my suggestions were geared towards this goal in mind. You misread my post. My original post was about , not consolidation. I'm not necessarily trying to minimize interest paid.

- After reading the entire thread and additional posts from the author, I - would like to make some additional comments:

- - Home equity is a sleeping asset.  In other words, it has no tangible - value until one of two things happens; either you sell out to capture - the equity or you refinance to claim the equity.  Home equity can not - be considered part of one's networth until one of these two events - happen. In my case, home equity is nice but it will never actually be realized for this house in the way traditionally thought of, because the equity in my house will, within the next 2 to 4 years, be put towards a bigger house. Whether it is to be included in one's net worth you're the first person I've ever heard say it shouldn't.

- - "Moving " is a short term fix to the author's dilemna, the long - term fix is to either lower cash outlays to be in line with the current - family's income (budget) or increase the family's monthly income (Earn - your way out of ). I agree, which is why there is no way I would ever pay off relatively short-term with home equity that would carry a much much longer term and also be tied to my home.

- - Aside from the added tax benefits from converting non-deductible - consumer into tax deductible mortgage interest, the author would - benefit from drastically reduced monthly expenditures. That would benefit me from a cash-flow position. But certainly not a short-term or long-term standpoint.

  Rolling the 19K

- currently owed into a 30 year 2nd mortgage at 6.25% would result in a - payment of nearly 400% or from 561 per month to - 116.99.  Combined with an equity acceleration plan, the author can - benefit from the added tax benefits and minimize the total interest - paid back.  It appears to me that the author is trying to do "more with - less" (or at the same with less), and this is a viable option based - upon this goal. You're advising me to kick the can a ways forward. It wouldn't relieve me of , and would in fact increase the as the interest actually paid would be much more over the years it would take to pay off, versus the 2 to 3 years maximum it will take me to pay off my debts currently.

Also, it's clear you have misread my posts. I'm not trying to "do more with less" - I've simply come up with a nice chunk of cash (to me) and need to decide which to pay off first. The last thing I'd want to do is simply push off the by rolling it into my home equity LOC or a 2nd mortgage.

- - If the author can't pay his bills, then he is going to lose both his - house and the uncaptured equity. Whoah. Did you read my posts?

- - I wouldn't pay off anything with either the bonus or inheritance as - the author is currently unemployed with child (and stay at home mom). This confirms it. You did not read my posts. I'm not a stay at home mom. I'm the husband of one. I am employed.

- This money might come in handy for one of those unexpected emergencies. Scott, I appreciate your participation in this thread as the more I receive the better. But please, next time, read my posts prior to responding.

John,

I enjoy your " free or die" mentality, but let's keep things in context here.  I advised the OP to consolidate the two cars (before I was aware of the interest rates) and the student loan into a 2nd mortgage.  I hardly think reducing his cash outlays 581 to 120 per month is paving the road to bankruptcy.

We appear to disagree on other points as well; if you want "shelter", rent an apartment, but home is so much more then that and should be managed like any other investment.

Net worth is defined as the CASH value of all of your assets, minus the total of all of your liabilities. Put another way, it is what you OWN minus what you OWE.  Owning a house outright is an asset, and until then, it is a liability.  Real Estate Holdings (owned real estate) is used towards networth calculations, home equity is not.  This is not my definition but SAP (standard accounting procedures).

Regards,

Scott Miller Commercial and Residential Lender/Broker

Disposable income freed as a result of being mortgage free is not liquidity of home equity and appreciation is a function of market conditions and not rate of return.

Regards,

H. Scott Miller Commercial and Residential Lender/Broker

"$cott" <ezmortgagelo@aol.com- wrote in news

- Net worth is defined as the CASH value of all of your assets, minus the - total of all of your liabilities. Put another way, it is what you OWN - minus what you OWE.  Owning a house outright is an asset, and until - then, it is a liability.  Real Estate Holdings (owned real estate) is - used towards networth calculations, home equity is not.  This is not my - definition but SAP (standard accounting procedures). Scott, you're just dead wrong on this. The cash value of your house is it's resale value. Then minus the mortgage. The difference, called equity, is part of your net worth. Don't try to talk Standard Accounting Procedures with accountants.

Elizabeth Richardson

"$cott" <ezmortgagelo@aol.com- wrote in news

- Disposable income freed as a result of being mortgage free is not - liquidity of home equity and appreciation is a function of market - conditions and not rate of return. How do you compute the rate of return on stocks? Isn't their value a function of market conditions?

Elizabeth Richardson

In article <1137071828.067601.48@z14g2000cwz.googlegroups.com-,

 "$cott" <ezmortgagelo@aol.com- wrote: - I enjoy your " free or die" mentality, but let's keep things in - context here.  I advised the OP to consolidate the two cars (before I - was aware of the interest rates) and the student loan into a 2nd - mortgage.  I hardly think reducing his cash outlays 581 to 120 per - month is paving the road to bankruptcy. Perhaps, but again, you fail to take into account risk.  What if one of the kids or his spouse gets cancer.  By using up the 2nd mortgage on cars that will rust out long before the payments are done, they have given up the ability to borrow money for life saving medical treatment.  You have to consider risk.  If you mortgage yourself up to the limit buying consumer goods, all it takes is some small event to tip over the house of cards.

- We appear to disagree on other points as well; if you want "shelter", - rent an apartment, but home is so much more then that and should be - managed like any other investment. That type of thinking is used by all those people who bought far too much house, and now don't even have an extra $6 to go see a movie once a month.  How else could over 10% of mortgages be in default?

- Net worth is defined as the CASH value of all of your assets, minus the - total of all of your liabilities. Put another way, it is what you OWN - minus what you OWE.  Owning a house outright is an asset, and until - then, it is a liability.  Real Estate Holdings (owned real estate) is - used towards networth calculations, home equity is not.  This is not my - definition but SAP (standard accounting procedures). Maybe that makes sense to math wizards, but it makes little sense to the 92% of the population that struggles to make a living on a pay check.

Most people get paid some regular amount, lets call it $X per month. They all have expenses, $Y per month.  Often times Y is very close to X.  In fact, most work-a-day people only make a few thousand dollars profit a year after taking care of expenses and taxes.  Some make less, some make no profit, and some go backwards each year.

Net worth might be a fun calculation for you, but for most people, what matters is how much they keep of what they get.  Those that are good at keeping more of what they make have an opportunity to accumulate wealth.  Those who keep little of what they make might make it to the retirement line, but end up there broke and living on charity.  Those who spend more than they earn will end up toes up at some point.  For those people, the calculations, special cases, and cheap mortgages mean nothing they are still broke.

-john-

-- ====================================================================== John A. Weeks III           952-432-2708            j@johnweeks.com Newave Communications                         ======================================================================