Millions Using Home Equity Line to Pay Bills, Survey Shows

Millions of Americans are using the equity in their homes to pay bills.

Ramsey Solutions financial expert Chris Hogan discusses the new survey from Bankrate.com, which shows that homeowners think it’s a good idea to tap into the value of their homes to pay bills and the best time for millennials to buy a house.

As personal debt continues to climb, many flat-broke Americans believe maintaining everyday household bills is a good reason to tap into the value of their homes.

Twenty-four million Americans think that withdrawing cash from their home equity is suitable for making home improvements, according to a new Bankrate.com survey.

Home equity is the property’s market value minus any outstanding loan balance, typically the mortgage. A home equity line of credit, often referred to as a HELOC, is a second mortgage that gives homeowners access to cash and uses their home’s equity as collateral.

“Home equity lines of credit are essentially a big credit card attached to your home,” Ramsay Solutions financial expert Chris Hogan explained to FOX Business’ Dagen McDowell on Wednesday.  “It’s a brilliant marketing plan by the banking industry because they never call it what it is — it’s a mortgage. It is a lien on your home.”

By taking out a HELOC, homeowners increase the risk of losing their home, he said, and devising a savings strategy is a much better way to pay for renovations.

“Home improvements are not a necessity; that’s a want. And what we can’t do is get our wants confused with our needs,” he said. “Leave your equity alone, save up, pay cash for improvements and other things you want to do.”