Author and radio host Dave Ramsey consistently stresses the importance of being free of debt.
The exception he makes is when people have bought a home with a good amount of equity.
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But there is one thing he says homeowners should almost never do.
An advice-seeker, identifying herself as Natalie, had a question along these lines.
"Dear Dave," she wrote, according to KTAR News in Phoenix. "My husband was recently told layoffs are about to happen at his company, and that it might be a good idea for him to start looking for another job. He has found a couple of good possibilities, but the jobs are located about 100 miles away."
She then explained her ideas about a possible approach to the home the couple was planning to move away from.
"In preparation for a possible move, we spoke with a real estate agent who told us we’d have to remodel our kitchen to sell the house," she wrote. "We’ve got about $4,000 in savings, but the agent said remodeling would take between $2,500 and $3,000. Should we get a second mortgage to pay for the work?"
Ramsey was quick to respond with some advice.
"Dear Natalie," he wrote. "For starters, I’d suggest cutting expenses any way you can, living on a strict budget and saving as much cash as possible."
"But taking out a second mortgage?" he asked, and then answered with some straight talk. "No! You don’t want that hanging over your heads."
The personal finance personality then offered some words about the kitchen.
"You might want to get another opinion on the kitchen remodel, too," he said. "Sure, a new kitchen would be nice, but would it be a make-or-break kind of thing if you decide to sell your home? Probably not, unless it’s in really terrible shape right now."
Ramsey said, in no uncertain terms, that he would not advise getting a second mortgage.
"Regardless, there’s no way I’d go into debt to make this happen," he said. "I mean, your house isn’t even on the market yet. There’s no reason to fix up a house that’s not for sale, especially when you’ve got just $4,000 to your names."
Ramsey counseled some patience in the matter.
"My advice is to wait and see how the whole job situation plays out before you make any big decisions," he wrote. "Then if you end up selling the house and moving, you might take $500 or so from savings to freshen up the kitchen a little bit."
Ramsey has been clear about this strategy before.
"A second mortgage is when you sacrifice your own home equity (by turning it into a loan) in exchange for a faster way to pay off other debts, complete home improvement projects, or buy something you couldn’t otherwise afford," the Ramsey Solutions website stated.
"But it’s debt. You must pay it back," the website continued. "And since a second mortgage is secured by your home, you’ll lose your house if you don’t pay it back."
"That’s some scary stuff."
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