Should I use a HELOC to buy an investment property?

Using a Home Equity Line of Credit (HELOC) to invest in property has its benefits, but comes with significant risks. Here’s what you need to know.

Benefits of a HELOC:

Lower Interest Rates: Typically lower than credit cards or personal loans.
Tax-Deductible Interest: In some cases, interest may be deductible.
Flexible Borrowing: Access funds as needed.
Leverage Home Equity: Unlock your home’s value for investment.

Risks to Consider:

Risk to Your Home: Missing payments could put your primary residence at risk.
Variable Interest Rates: Rates may rise, increasing costs.
Additional Fees: HELOCs often come with hidden costs.
Market Volatility: Investing borrowed money adds risk.

Should you use a HELOC?

Instead of using a HELOC, focus on financial stability. Pay off debts, build an emergency fund, and secure your retirement accounts. Then, create an “opportunity fund” in a savings or brokerage account to invest directly in property without leveraging your home. While HELOCs offer flexibility, their risks often outweigh the benefits. Building cash reserves for investments is a safer and more sustainable approach.

Click here to schedule a consultation with one of our financial advisors to discuss other ways for you to invest in property.

Missie Beach, CFP®, CDFA®
Senior Financial Advisor, Wiser Wealth Management

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