Dave Ramsey is great but does he have it wrong on home equity loans? Should you pay cash for a home even if you can? We talk about it here. Hey - Do you agree with me? Disagree and think I am way off base?


Hey, folks. This is Michael Lush. Recently came across an article where Dave Ramsey's talking about a home equity loan. Quite frankly, I don't disagree but I think there was a miscommunication there because he's giving his listeners information regarding a home equity loan and most of those listeners are thinking that pertains to a home equity line of credit.

Again, they're two separate things. Dave's talking about folks using a home equity loan to pay off debt or payoff credit card debt which creates bad habits. They already had bad habits. All they're doing is taking out more debt to pay off that debt and they still have the credit cards and they still rack up more credit cards.

Again, I don't disagree with him. I have the most utmost respect for Dave Ramsey, son of a Christian. Dave Ramsey misses the mark on a couple concepts. Again, he's focusing on a home equity loan. That's an entirely different product of what we talked about.

A home equity loan is extra debt on top of your mortgage. What we teach is using a home equity line of credit to replace your mortgage. I would not encourage you to get a home equity loan but I would encourage you to get a home equity line of credit to pay off that mortgage.

What's more risky? To have a 30-year mortgage where you buy your house and one of the bank or have a home equity line of credit where you pay it off in 5 to 7 years? Let's take an example of a 250,000 mortgage at 4.25%.

If you finance that on a 30-year mortgage, you're actually going to pay $206,000 of interest. You're actually going to pay $456,000 for that $250,000 house. Now, if you got to ask yourself, at what point is my $250,000 house going to be worth $456,000? The most common answer is a long time, if ever.

Is it worth it? We have to change our mindset to look at the total cost of a home versus just the purchase price because the purchase price does not dictate the total cost of a home if you're financing it.

Instead, if you're going to take that same $250,000, use the cash flow strategies that I teach, you're going to actually get it paid off in 5 to 7 years, instead of paying $205,000 of interest, you're going to pay $53,000. Again, it actually takes less discipline to do it my way than it does to segregate your money and make separate payments to your mortgage over 30 years.

Again, if you like this video, be sure to comment below. Whether you agree or disagree with me, it doesn't matter. I'd like for you to comment below and let's debate this. Again, subscribe to our channel so you get more videos. Take care. God bless. Thanks for watching the video.

Disclaimer: Replace Your Mortgage does not offer mortgages, Helocs, or loans of any kind. Replace Your Mortgage is not a bank, and does not provide credit offers. Replace Your Mortgage is strictly for educational and informational purposes only.
Top chevron-down