How big a risk do you take--should you take--when you borrow against your home? With prices in most places bounding up, homeowners find themselves sitting on a fat pile of capital (your "home equity"--the cash you'd put in your pocket if you sold the house and paid off the mortgage).
Too bad we got what we wanted, when we started investing our own retirement funds. We wanted choice--lots of different types of mutual funds. We imagined dividing our money among the best of the best--so much in stocks, so much in bonds (if we paid any attention to bonds).
Should you strip? No, I'm not talking pole dancing, although ads for financial products sometimes read like soft porn. "Psst," the guys in raincoats hiss, "I know a way to get rich quick." Today's hot idea is equity stripping--borrowing most or all of the equity out of your house.
If you leased a car in the late 1990s, you got a terrific deal. All told, you paid less than the car's true worth and the lessor swallowed the loss. On SUVs you saved $5,000 or $6,000, compared with the cost of buying the vehicle outright.To you, the bargain probably wasn't apparent.
You're in trouble if you have to buy your own brand-name prescription drugs. Over the past decade, prices leaped by more than double the inflation rate. Treatments for chronic conditions can easily top $2,000 a month--no wonder that one in four Americans can't afford to fill their prescriptions.
The sweet spot for refinancing a mortgage passed you by a year ago, when 30-year, fixed-rate loans hit a low of 5.37 percent. Back then, "refis were no-brainers," says Keith Gumbinger of HSH Associates, which gathers mortgage data. "You could grab any deal you saw and go away happy." It's still cheap to borrow extra money against your house.