According to a recent report, homeowners across the United States are sitting on a goldmine — $17 trillion worth of home equity. This represents the portion of a home’s value that a homeowner truly owns, after accounting for mortgage debt. With property values soaring, many Americans have seen their home equity grow significantly, often without even realizing it.
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The Big Idea: Investing Home Equity for Bigger Returns
Grant Cardone, a well-known real estate investor, recently sparked a conversation on Twitter by suggesting that instead of letting all that home equity just sit there, homeowners could invest it to earn much higher returns — anywhere from 6% to 12%.
According to him, this approach could unlock trillions of dollars in passive income, especially for aging homeowners who could use that extra cash to enhance their lifestyles.
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Ways To Use Home Equity
1. HELOC (Home Equity Line of Credit)
HELOCs work more like a credit card. You can borrow money as needed during a certain period and then repay it later. You can typically borrow up to 85% of your home's equity.
2. Home Equity Loan
This is like taking out a second mortgage. You get a lump sum of money upfront, and you pay it back over time with a fixed interest rate. You usually need to keep at least 20% equity in your home.
3. Cash-Out Refinance
Here, you take out a new, larger mortgage and get the difference in cash after paying off your old mortgage and covering fees.
Why Not Everyone Agrees
Not everyone is on board with this idea, though. Many people responded to Cardone's tweet with concerns about the risks involved.
For many homeowners, the equity in their home represents a financial safety net as it's a secure asset that doesn't fluctuate with the stock market. Most people prefer to keep their home equity intact instead of risking it in investments that might or might not work out. As one X user said, “They prefer safety over returns. I talk to them every day.”
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Others pointed out that using home equity to invest could backfire. If the investments don't perform well, homeowners might struggle to repay loans or lines of credit taken out against their home equity, and this could lead to foreclosure, leaving them without a home.
Some even joked about the idea of everyone cashing out their home equity, asking, “Where would everyone live? On the street or in a cave?” Homes aren't just financial assets. They're where people live and raise their families. Risking that security for the chance at higher returns is a gamble not everyone is willing to take.
And one of Cardone’s followers tried to explain what Grant even meant with his original tweet. He said, “For those confused, Grant believes people should rent where they live but own properties (commercial and residential) that pay rent.” It’s something that Cardone supposedly does.
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Financial expert Dave Ramsey also has a different take on Grant Cardone's idea because he’s known for his conservative approach to money management, particularly when it comes to debt. He often advises against borrowing against home equity, stressing the importance of financial security and living debt-free. To him, using home equity to invest in the market is too risky, especially for those nearing retirement.
While the chance to earn more money is appealing, the risks are big and need to be thought through carefully. For many homeowners, it might be smarter to keep their home equity safe so they have a secure place to live no matter how the market changes.
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