Brian O'Connor

speaker

46 appearances 1 recordings 1 series first heard May 2022 last heard May 2022

Brian O'Connor’s voice in public audio — every appearance, attributed to the second.

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WSJ Your Money Briefing · How to Protect Your Home’s Value Now Against Future Declines · 20 May 2022 podcast

This isn't something you want to do with all of your home equity.

It's kind of like buying an insurance policy.

And people feel that the offset, losing a little bit of the gain, is worth it for the protection on the downside.

Well, thank you for having me on today.

That's right.

That is exactly the best way.

And if you're not worried about this and it's not a concern for you, the best thing you can do is keep making your payments because every payment you make is building equity and you can sleep soundly at night and not worry about it a bit.

Well, this is an old tried and true approach that personal finance experts have discussed for years.

Basically, your return on your investment is the difference between your, say, a high interest credit card rate, like 18 or 21%,

And if you can borrow against your home equity at, say, 4.6%, your return is the difference in the two rates.

So if you can borrow at 4.6%, retire the 21% credit card, you're getting that instant return of paying a lot less interest if you don't stretch it out over time.

And also, more of your payment goes to the principal, so you're paying it off faster.

And that's a pretty simple thing.

You don't need anybody's permission.

You don't need to do anything extra.

You just need to tap that equity through a home equity loan and you're all set.

Now the downside to that is you need to look at why did I have this credit card debt in the first place?

Because if you don't address that, if it comes from something like overspending or not being in control of your household finances,

What that can turn into is now you have a home equity loan to pay off your old credit card debt, and then you keep adding to your credit card balance.

So now you've got two debts that you've got to service, and this can push you to the point where if you can't afford to make payments, you could risk losing your home.

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