Can you take advantage of the dead equity in your home?

January 06, 2020

As an investor, you may view the equity in your home as an untapped financial resource. Here’s what you could do.

If you own a home, you probably know what home equity is. It’s the difference between the value of your home and the amount you owe on your mortgage. But do you know what dead equity is?
Some investors would consider untapped home equity in a low-interest environment dead equity and a lost opportunity.

What is dead equity?

In real estate, dead equity refers to the money you have tied up in your home that you’re not using to increase your investments. In other words, you might have $100,000 of equity in your home, but how is that making you any money? Because you have a large asset not earning any interest, some would consider it “dead."

What can you do about dead equity?

When interest rates are low, you can get a good rate on a loan. There are many ways to do this — home equity loans, home equity lines of credit, reverse mortgages — but the result is the same: You borrow money against an asset you own (the equity in your home).

For example, say you borrow on the equity in your home. If interest rates for home equity loans are low, say 4.5 percent, some advisors might tell you it’s smart to borrow against that equity and invest in stocks or other investments that could yield 6 or 8 percent returns. That way, although you’re borrowing money, you’re making up the difference between the interest rate and your yield. In this case, that’s 1.5 or even 3.5 percent.

Is this a good idea?

Whether you try something like this depends on your tolerance for risk. It might be very exciting to think about borrowing money at 4.5 percent to earn 8 percent with the proceeds, but remember that no investment is a sure thing.

For example, the stock market fluctuates, so while you might borrow on your home to invest in a bull market, there’s the possibility you end up taking out a loan to invest in a bear market — putting you in a deep hole. Is this a risk you can afford to take?

Another question is how much savings and how many income streams you have to carry you through unexpected financial troubles like a job loss, significant medical bills or unexpected home repairs? If faced with any of these, would you still be able to make the additional loan payments? If not, you might be putting your home at risk.

Use a home equity loan calculator

As with any investment, it’s best to start with a full understanding of the potential risks as well as the benefits. Use the U.S. Bank home equity loan calculator to compare rates and payments across a variety of home equity options. But after you calculate your potential for a home equity loan, think carefully before you sign on the dotted line.

Learn more ways to leverage your home’s equity.

Home equity at U.S. Bank

Compare and apply online

800-872-2657

How to save for a wedding

How I did it: Turned my side hustle into a full-time job

Multiple accounts can make it easier to follow a monthly budget

What is a good credit score?

For today's relocating home buyers, time and money are everything

Crypto + Relo: Mobility industry impacts

Can ABL options fuel your business — and keep it running?

Evaluating interest rate risk creating risk management strategy

Tech lifecycle refresh: A tale of two philosophies

5 steps to selecting your first credit card

Don’t underestimate the importance of balancing your checking account

Beyond Mars, AeroVironment’s earthly expansion fueled by U.S. Bank

Hybridization driving demand

5 financial benefits of investing in a vacation home

7 diversification strategies for your investment portfolio

4 strategies for coping with market volatility

Can fantasy football make you a better investor?

A guide to tax diversification and investing

Year end tax planning tips

4 major asset classes explained

ETF vs. mutual fund: What’s the difference?

Effects of inflation on investments

Investing myths: Separating fact from fiction in investing

Bull and bear markets: What do they mean for you?

Credit: Do you understand it?

What types of credit scores qualify for a mortgage?

Test your loan savvy

Webinar: Mortgage basics: What’s the difference between interest rate and annual percentage rate?

5 questions to help you determine your investment risk tolerance

4 times to consider rebalancing your portfolio

A beginner's guide to investing

How do I prequalify for a mortgage?

Can you take advantage of the dead equity in your home?

Webinar: Mortgage basics: How much house can you afford?

Home equity: Small ways to improve the value of your home

Webinar: Mortgage basics: Finding the right home loan for you

Is a home equity line of credit (HELOC) right for you?

8 steps to take before you buy a home

Webinar: Mortgage basics: 3 Key steps in the homebuying process

Webinar: Mortgage basics: Buying or renting – What’s right for you?

How to use your home equity to finance home improvements

Webinar: Mortgage basics: What is refinancing, and is it right for you?

These small home improvement projects offer big returns on investment

Should you get a home equity loan or a home equity line of credit?

5 things to avoid that can devalue your home

6 questions to ask before buying a new home

What is refinancing a mortgage?

What is an escrow account? Do I have one?

Quiz: How prepared are you to buy a home?

10 questions to ask when hiring a contractor

What to know when buying a home with your significant other

Webinar: Mortgage basics: How does your credit score impact the homebuying experience?

What is a home equity line of credit (HELOC) and what can it be used for?

Dear Money Mentor: When should I refinance a mortgage?

Building a dream home that fits your life

Beyond the mortgage: Other costs for homeowners

How I did it: Bought my dream home using equity

Get more home for your money with these tips

What are conforming loan limits and why are they increasing

Saving for a down payment: Where should I keep my money?

4 ways to free up your budget (and your life) with a smaller home

How I did it: Built living spaces to support my family

Managing the impacts of appraisal gaps in a hot housing market

Is it the right time to refinance your mortgage?

Spring cleaning checklist for your home: 5 budget-boosting tasks

Overcoming high interest rates: Getting your homeownership goals back on track

Money Moments: How to finance a home addition

The lowdown on 6 myths about buying a home

Dear Money Mentor: What is cash-out refinancing and is it right for you?

Home buying myths: Realities of owning a home

House Hacks: How buying an investment property worked as my first home

How to use credit cards wisely for a vacation budget

For today's homebuyers, time and money are everything

Should you buy a house that’s still under construction?

Dear Money Mentor: How do I begin paying off credit card debt?

10 uses for a home equity loan

Know your debt-to-income ratio

How grandparents can contribute to college funds instead of buying gifts

How to open and invest in a 529 plan

Your guide to breaking the rental cycle

Is a home equity loan for college the right choice for your student

How to apply for federal student aid through the FAFSA

Which is better: Combining bank accounts before marriage — or after?

Save time and money with automatic bill pay

Is it time to get a shared bank account with your partner?

It's possible: 7 tips for breaking the spending cycle

What to consider before taking out a student loan

Is raising backyard chickens a good idea financially?

Here’s how to create a budget for yourself

Common unexpected expenses and three ways to pay for them

9 simple ways to save

Do you and your fiancé have compatible financial goals?

7 steps to prepare for the high cost of child care

Is online banking safe?

Recognize. React. Report. Caregivers can help protect against financial exploitation

How I did it: Paid off student loans

The A to Z’s of college loan terms

Key considerations for launching an ILP

Private equity and the full-service administrator

Capitalizing on growth in the private equity space

Costs to consider when starting a business

Questions to ask before buying a car

Investing in capital expenditures: What to discuss with key partners

Should you give your child a college credit card?

Webinar: Uncover the cost: Building a home

Webinar: Mortgage basics: Prequalification or pre-approval – What do I need?

Adulting 101: How to make a budget plan

You can take these 18 budgeting tips straight to the bank

Your financial aid guide: What are your options?

How I did it: Learned to budget as a single mom

Changes in credit reporting and what it means for homebuyers

Interval funds find growing popularity

A first look at the new fund of funds rule

How liquid asset secured financing helps with cash flow

An investor’s guide to marketplace lending

ABL mythbusters: The truth about asset-based lending

What is a CLO?

The ongoing evolution of custody: Tips for renewing your custody contract

Start a Roth IRA for kids

What Is a 401(k)?

How institutional investors can meet demand for ESG investing

How to get started creating your business plan

Buying a home Q&A: What made three homeowners fall in love with their new home

What type of investor are you?

Personal loans first-timer's guide: 7 questions to ask

Myth vs. truth: What affects your credit score?

Improving your credit score: Truth and myths revealed

How to build and maintain a solid credit history and score

Decoding credit: Understanding the 5 C’s

How to improve your credit score

6 essential credit report terms to know

Understanding yield vs. return

Retirement income planning: 4 steps to take

5 ways to maximize your garage sale profits 

Retirement expectations quiz

6 ways to spring clean your finances and save money year-round

What you need to know about renting

What you should know about buying a car

What you need to know before buying a new or used car

Take the stress out of buying your teen a car

How to choose the best car loan for you

Employee benefit plan management: trustee vs. custodian

Practical money skills and financial tips for college students

Personal finance for teens can empower your child

5 unique ways to take your credit card benefits further

5 tips to use your credit card wisely and steer clear of debt

Co-signing 101: Applying for a loan with co-borrower

What’s a subordination agreement, and why does it matter?

Understanding the true cost of borrowing: What is amortization, and why does it matter?

What’s your financial IQ? Game-night edition

Investment strategies by age

How to use debt to build wealth

How to start investing to build wealth

How to build credit as a student

5 tips to use your credit card wisely and steer clear of debt

Common small business banking questions, answered

3 signs it’s time for your business to switch banks

10 ways to increase your home’s curb appeal

Money Moments: Tips for selling your home

How I did it: My house remodel

Everything you need to know about consolidating debts

Student checklist: Preparing for college

What are alternative investments?

Webinar: Uncover the cost: College diploma

How I did it: Bought a home without a 20 percent down payment

Crypto + Homebuying: Impacts on the real estate market

Your quick guide to loans and obtaining credit

Webinar: Uncover the cost: Home renovation

Do I need a financial advisor?

4 questions to ask before you buy an investment property

Collateral options for ABL: What’s eligible, what’s not?

How much money do I need to start investing?

How do interest rates affect investments?

Good debt vs. bad debt: Know the difference

Preparing for homeownership: A guide for LGBTQ+ homebuyers

Parent checklist: Preparing for college

Are you ready to restart your federal student loan payments?

U.S. Bank asks: What do you know about credit?

Prioritizing payroll during the COVID-19 pandemic

What type of loan is right for your business?

Closing on a house checklist for buyers

Leverage credit wisely to plug business cash flow gaps

4 questions you should ask about your custodian

Evaluating interest rate risk creating risk management strategy

Housing market trends and relocation impact

OCIO: An expanding trend in the investment industry

How to fund your business without using 401(k) savings

How to maximise your infrastructure finance project

ESG-focused investing: A closer look at the disclosure regulation

4 benefits of independent loan agents

Middle-market direct lending: Obstacles and opportunities

Checklist: 10 questions to ask your home inspector

How to establish your business credit score

The unsung heroes of exchange-traded funds

How to establish your business credit score

Checklist: 6 to-dos for after a move

4 small business trends that could change the way you work

Pros and cons of a personal line credit

3 tips for saving money when moving to a new home

Maximizing your infrastructure finance project with a full suite trustee and agent

What’s the difference between Fannie Mae and Freddie Mac?

High-cost housing and down payment options in relocation

At your service: outsourcing loan agency work

Streamline operations with all-in-one small business financial support

Opening a business on a budget during COVID-19

How a small business is moving forward during COVID-19

When to consider switching banks for your business

5 tips to help you land a small business loan

Checklist: financial recovery after a natural disaster

Equal Housing Lender

Loan approval is subject to credit approval and program guidelines. Not all loan programs are available in all states for all loan amounts. Interest rate and program terms are subject to change without notice. Mortgage, home equity and credit products are offered by U.S. Bank National Association. Deposit products are offered by U.S. Bank National Association. Member FDIC.