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First, let's look at the definition of equity. Your equity is simply the difference between what someone will pay for your house, less your mortgage balance. Equity increases when you pay down your mortgage balance or when your house goes up in value. Equity is not guaranteed or secure. Suppose your area experiences the shut down of a major employer, or a series of employers. Or, suppose you live in a city that is going through a net loss in population, as Pittsburgh PA has gone through in the late 90's and early 00's. If more people are leaving an area than are moving in, housing values will go down. If housing values go down, so will your equity. Also, if you live in an area that has had a huge housing build up, and now there is an over supply of houses, your equity may stay flat or decline. This has happened in parts of Arizona. Thus, your home equity is not secure.

Next, let's look at the concept of liquidity. This means the ability to get to it if you need it. Most homeowners don't think of borrowing their equity until they need it because of a financial cash crunch. This can happen with the loss of a job, or a mother having to take off unexpected time after childbirth, or after a disability of any sort. If you have been making your payments on time for years and years, building up your equity. Now, you lose your job, or are forced to take a new one that pays much less. You start to get behind in your bills, and your credit score goes down. As a last resort, you call a mortgage broker to refinance your mortgage and pull out cash. Guess what? Too bad. By now, you are a risk to the lender and most will either decline your application or charge you an interest rate that is way too high and with fees that are too high as well. Most lenders look to your credit score, mortgage payment history and your debt-to-income ratio (DTI) when deciding to approve your loan. If your over all debt (mortgage payment, property taxes, homeowner's insurance, credit card bills, card loans, and other debt payments) exceed 50% to 55% of your gross monthly income (before taxes), you will be declined. Now, what good is all that equity doing in your home? You can't get to it, thus it is not liquid.

The third point I want to bring up is that equity has no rate of return. If you have a house that is worth $200,000 and the mortgage balance is $200,000, its value will go up at the same rate as it would if the mortgage balance was only $100,000. The extra equity is as good as taking money out of the bank or from other investments and placing it under your mattress. It has a zero percent return. If you were to leverage your equity by borrowing it, you could invest it and have it earn a return. This is what I want to cover next.

Pulling out your equity and investing it will get you around all three problems presented. First, once you borrow the money, you are not forced to pay it back if your equity drops. You only need to pay it back if you were to sell the house. A lender does not monitor the value of homes across the country and call a loan if the house value goes down. If you have it invested in particular investments, you have access to it on short notice, Thus, your equity is now liquid. Suitable investments include an insurance product known as an Equity Index Universal Life contract. This is a tax deferred product that is 100% secure against loss of principal and has the ability to grow without paying income taxes on the gain until you need it. Another option is a real estate investment fund that lends its money to real estate investors who are buying, rehabbing and reselling residential property.

One such program, offered by Home Investors LLC pays a guaranteed rate of 16%, paid quarterly. After two years, you can pull out your principal, thus you still have liquidity. There are many other options available, so you should talk with me and a financial planner to see what is best for you. The main criteria is to borrow the money with an interest-only mortgage and invest it at a rate that is close to or higher than the mortgage interest rate. The reason to use an interest-only loan is that you are not concerned about paying the loan back. You have pulled out the equity to invest it, thus you want to keep the loan payback amount as low as possible. Your investment account will be more than large enough to cover the mortgage balance. Thus, you don't need to focus on paying off the mortgage. Simply focus on putting your home equity to work.

To help you manage the growth of your equity, click on my Home Equity Investment Analyzer [NOTE to Mortgage Consultants: This will link to YOUR Investment Analyzer on YOUR personalized website.] and try various scenarios. If you find that this program can increase your net worth, give me a call and we can go over specifics based on your credit, home value and types of investments.

About My Services

I believe in providing service to all my clients even after the mortgage closes. If you ever need assistance in dealing with any issues that you may run into, please let me know. Here are some of the ongoing services I can provide you:

• Evaluate any "low mortgage rate" offers you get in the mail or via email
• Assist you in obtaining a home equity loan or home equity line of credit should the need arise
• Help you properly manage the equity in your home to achieve the highest return
• Assist any friends, family or co-workers who may be in the market to buy a home or refinance their mortgage
• Review your credit report with you if you feel you may be a victim to identity theft
• Provide you with names of trusted financial planners or tax planners if you need this type of assistance
• Review your auto and homeowner's insurance to make sure you have the coverage you need and to make sure you are not paying more than you should
• Advise you when you may want to consider refinancing your mortgage based on prevailing interest rates, and your level of debt.

At Your Company Name, we offer mortgages for most buyers, including ones who are self-employed or who have damaged credit. We have lenders who offer 100% financing meaning no down payment for qualified buyers.

We also offer mortgages with start rates as low as 1%, making it easier to get a buyer into a home or use their equity to create an investment portfolio while having a minimal impact on cash flow.

If you know anyone who can benefit from my services, please call my office. Referrals are very important to me and my company.