Can You Still Use Your House to Pay for Your House?

In the time this blog has been running, more has happened to the world of housing affordability and equity holdings than anyone could have imagined. Doomsayers say doom and prognosticators prognosticate. The question is:

Using a concept I've come to call equity cycling, in all we paid close $100,000 on our loan in those two years, without decreasing our lifestyle. In other words, it was no sweat.We didn't miss the money. When we needed it, we took it back (the "cycling" part).

I thought the idea was brilliant when I first heard of it, though I didn't understand it completely. Doing it  made me a believer. My friends cheered my success and urged me to write an ebook, which we aptly called Let your Mortgage Make You Rich!
With all that's happened to housing and to the economy, is it still possible to use equity cycling? (to pay off your home or any major purchase for that matter)

The simple answer is: If you have equity, Yes. If your HELOC has not been frozen or you can still get one. You could also use a regular line of credit — not a loan! United First Financial is even encouraging people to use regular credit cards to flow money through their debts. I wouldn't go that far. I think that's not fighting fire with fire but playing with fire.

At the highest estimates, it's possible 10% of the people with active mortgages are in real trouble. One-third of home owners (approximately) own their homes outright - free and clear. That leaves about 60% of homeowners not in trouble.

Yes, you can use the equity in your home (the paid-for portion) to reduce the balance on the unpaid for portion, dramatically reducing your interest. Of course, you do have to pay interest on the HELOC. But since it's calculated differently, and using the money cycling techniques as I outlined (in the eBook referenced above), our interest on saving $70,000 was $208. 

Not too shabby.