Limiting Home Equity to no more than 25% of Appraised Value, WHY?
someone responded to a post on the Buying and Selling Forum about taking out PMI or doing an 80/10 mortgage as follows
How long you actually stay in the home is irrelevant. What matters is how long you keep the existing loan structure itself in place. For significant reasons of safety, liquidity, and net-worth growth, Financial Planners now recommend that your real estate equity be seperated from the property and rebalanced to safer investment accounts whenever your illiquid equity reaches 20-25% or greater. In most markets, even during "slow appreciation" periods, this occurs between the 3-6th year, at which time avoiding a refinance will actually end up COSTING you money, as well as incur greater unnecessary risks
I will link the entire post including my response where I questioned how you can do this if your income is not commensurate with a higher mortgage amount or you are vulnerable to moving sometime in the next year or two but do not have a definite timeline so the closing costs could potentially be a waste
I am curious as to what others think
Here is a link that might be useful: Home Equity Post