Let's pretend you just bought a house in an older neighborhood and you were told the following urban legend at your housewarming party:
The house and several others in your neighborhood had been built during the Great Depression. It is rumored that some relatively affluent individuals had escaped without suffering total losses in the market but they were still panicked. So, they cashed in their investments and converted the money into gold and then built a modest, comfortable home to ride out the storm. They decided that since banks weren't safe, they would stash the gold between the studs of their new home and then cover the opening with plaster. When things got back to normal, they would simply bust out the plaster, retrieve their gold, and start investing again. After all, the cost of repairing the hole would pale in comparison to accessing their gold again. Meanwhile, a handful of these folks passed away before things got better and obviously they hadn't told anyone for fear that some desperate soul would try to steal it. They never even told their family.
Now, you have it from a fairly reliable source that your house is one such house. Only trouble is you're going to have to gut it or at least start tearing into it until you find it. The price of the gold will far exceed any cost you will incur putting your house back together. You have a friend who is whispering in your ear that he found gold when he was remodeling his home so you really ought to try it. All of your other friends are saying that your home is lovely and even though there may be gold hidden in the walls, you should just leave it the way it is because at least right now you know what you've got.
What would you do? You've got a very distinct possibility that there's gold in the walls but, you also are very comfortable with your home just the way it is. So, you live in your home for a few years and then sell it. A few months later, you're watching the news and there's a story about a family who purchased a home, started remodeling, and discovered a tidy stash of gold hidden under the plaster. You remember the rumor and upon closer observation you realize it's the house you used to own. I'm not going to ask what you'd be thinking at that point.
That is precisely what equity harvesting is all about. Many folks including financial planners shy away from it simply because they don't understand it. The view debt and assets as two completely separate parts of your financial plan. Debt is bad. Investments are good. You get a 15 or 30 year fixed rate mortgage because at least you know what you've got.
The truth is that, with the right tools, you can efficiently siphon equity out of your home for outside, relatively safe savings vehicles and still live out your retirement years with no mortgage payments. You don't have to choose between paying off your mortgage as fast as possible or staying mortgaged to the hilt and maxing out your retirement savings.
You can do both!
