Home Equity for expenses vs investment

[Suhaib Rehman]

Hi everyone,

I did some research on the net size of home equity that homeowners have built, especially over the last 10–15 years. It’s quite significant. However, when I looked at the statistics on how home equity loans are used, I found that almost 86% go toward expenses—e.g., home renovations, debt consolidation, emergency expenses, and education.

Recently, when I was considering a small business loan for a franchise, I was advised to consider using a home equity loan to cover some of the running costs, as I already have sufficient capital in my home as equity. In my opinion, this is a smart strategy. Even though it is still a loan, it’s for something that has the potential for a much larger upside.

How do you approach your home equity? Do you leave it untouched, use it for expenses, or invest it? Why do such a small percentage of HELOCs or equity loans go toward investments, businesses, or growing assets like real estate? Is this something you haven’t considered, or have you considered it but found it harder to use home equity for investment than for expenses?