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Originally Posted by Tapioca
^ I'm surprised that the Smith Maneuver doesn't get discussed more here. People always say that the market is only gains on paper, but for those who are risk-tolerant, the rising market has also increased the opportunities for investing. However, people will say that borrowing on the house is no different than borrowing on margin. The difference is that rising housing values, in particular rising detached values, have given people access to far more equity than borrowing on margin ever could.
Using HELOC for investing, whether it's in real estate or equities, is pretty par for the course for many baby boomers. Heck, it's how some first-timers are able to get into the market today - HELOC loans from baby boomer parents.
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I'm not sure as to the exact wording of this, but my mom who is a lender/mortgage broker for coast capital has told me that they, and a few other banks (cant remember which ones) have greatly reduced, and in some cases stopped all together the short term re-mortgaging and pulling out of additional credit in your home through HELOC and other means basically because of the insecurity of the "equity" a lot of these people are borrowing from.
Short term she says they've really cracked down as smaller entities like coast capital cant be exposed to such risk. But she said in the past these types of situations have flowed with the market as well, and in 1-2 years, if things continue the way they are, or even level out, odds are you will be able to go back and re-mortgage/borrow upon this newly realized equity, simply because it's been "stable" for a year or more.
this may not sound like a "new" thing, but Coast Capital has only recently started this in the last 2 months or so, before that money had been flowing fairly freely.