David A. Caplan, CPA, MBA - Certified Public Accountant

Q & A

I have a major repair necessary in my house. Should I sell some stock or take a home equity loan to pay for it?
-K.S., Linwood, NJ

Well, you're certainly not getting the money from me. The answer to this question depends upon where your money is invested, how much equity you have in your home, etc. If you are invested in mutual funds that are paying 15 to 25% or more, using this money will be costly. Not only will you lose the growth potential of this money, but you will also probably be paying capital gains tax on the gain. Assuming that you have plenty of equity in your home, a home equity loan is a far less expensive way to pay for the repair. The interest rate is far lower than what you have been earning on your investment, and the interest is normally tax-deductible. The downside, of course, is that you have to pay it back. Conversely, if your investments tend to be in lower-interest money market funds or CD's, it would be wiser to cash them in to pay for the repair. Or borrow the money from a willing family member.

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