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Subject:  Do you have a rational home equity policy? Date:  1/26/2005  9:32 PM
Author:  yobria Number:  44208 of 94100

Assuming you have a mortgage, haven't refi-ed beyond the $100K limit for tax deductibility, and are an experienced investor (fee/tax minimized, diversified), do you have a well thought out amount of home equity vs financial investments?

I mean, is there a reason you have a $300K mortgage and $100K in a taxable account vs the other way around?

Increasing home equity is equal to investing at your mortgage rate, after all tax effects. After tax, your mortgage is probably only worth 3-4%, versus long term stock returns of twice that. But the mortgage prepay "return" is risk free.

So I guess if you have a long time horizon, you should have a bias toward less home equity and more in stocks. Does anyone have a rule or guideline for home equity % vs age?

There are other considerations as well- I have friends whose "earthquake insurance" is having only 10% equity in their properties.

I've refied to the 100K limit, so would have to buy a new place to reset the mortgage basis.

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