Now may be just about the worst possible time to take money from your home. And quite a few economists have taken on the role of doomsayers as they predict a really bad recession. At such a time, a loan against your home is a surefire way to lose your home. One of the biggest risks is that our home is a collateral for the loan. So if we default, well, we’ll not only be broke but also out on the streets. One way to avoid something so drastic is to leave some breathing room for ourselves. For instance, after accounting for your primary mortgage and your HELOC, you should have a decent value of your home still available as equity. This helps us prepare for the unexpected.
However, I still think the best way is to not touch that home unless absolutely necessary. Before we tap into our home’s equity, we could try other methods of raising money. One of the most popular methods of getting money is to borrow from your 401(k). Usually, most retirement plans will allow you to borrow funds from them. You will have to repay it with interest over time. And it works out better than a credit card loan because the interest rates are much lower.
Alternately, you could also borrow from your life insurance policy. But that is possible only if you have a whole life policy. Then you can access the cash balance for personal needs while you’re still alive. Another benefit is that you may not have to pay back the loan.
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