If you own a home and need money, a home equity line of credit (HELOC) allows you to borrow against your home's equity, typically at a lower interest rate than other loan types. It can be a useful tool for disciplined borrowers facing a large expense. The potential downside is that you could lose your home, which is used as collateral.
According to Dave Ramsey, a HELOC should be off the table when you have a net worth of $40 million.
Jeff Bezos backs a platform that lets anyone invest in rental homes for as little as $100 — 6 ways to build wealth like a landlord without actually being one
JPMorgan sees gold hitting $5,000/oz by Q4 — and savvy investors are protecting their wealth with a tax-advantaged Gold IRA. Get your free guide from Priority Gold
The tax breaks in Trump's 'big beautiful bill' expire after 2028. Here are 4 moves to make before the window closes
Ashley from Columbus, Ohio, called into The Ramsey Show and told the namesake host she and her well-to-do husband were contemplating a HELOC on their vacation home to supplement their income on the advice of their financial advisor.
"There's no possible way that borrowing on your lake house is a good idea when you have $40 million," Ramsey said in a clip (1) posted on August 18. "I'm really disgusted at how pitiful your financial advisor is. This is just asinine."
As it turns out, the couple's money problems go far deeper than a quirky financial advisor.
Ashley explained that part of the problem is that approximately $30 million of the couple's net worth is tied up in a business her husband co-owns. However, her husband isn't on the board of directors and has no control over redemptions of shares. The board has been restrictive about redemptions, Ashley said/. This means the couple can't freely access the money.
But that still leaves $10 million, Ramsey pointed out, so what's the deal? Ashley revealed $4 million had been tucked away for retirement. She says that the remainder and her husband's estimated $400,000 in annual income is not enough to support their lifestyle.
What type of lifestyle were they living? Apparently, the kind that includes maintaining two homes, house staff, a horse farm, chartered yachts and private jets. Ashley also alluded to alimony payments being made to an ex-wife. She admitted the couple spent upwards of $1.5 million in a year but has since reigned in their spending.
Ramsey said the answer to their problems, rather than borrowing money, was for the couple to learn to live within their (substantial) means.
"The last thing you people need to do is to go into debt by renting a yacht," he insisted. "Cut your freaking lifestyle."
It's important to live within your means, no matter your income. In Ashley's case, that could mean keeping both homes but traveling more frugally and keeping other costs down.
Read More: Millionaires under 43 hold only 25% of their wealth in stocks. Here's where their money is actually going
Tapping into tax-advantaged investment opportunities rather than your home equity might be a better way to grow your wealth.
For instance, Ashley and her husband could consider investing in commercial real estate, which has major tax benefits, including the ability to depreciate the property's value annually and list this amount as an expense on their property's income statement – reducing their taxable income and leading to long-term tax savings.
Additionally, they may want to consider divesting from her husband's business as Ramsey suggested. This could free up the equity so they can invest it in real estate elsewhere for passive income without needing to borrow against their current vacation property.
And the couple doesn't have to leverage their own lake house as a rental or buy new property outright, which may come with additional costs and management issues.
Mogul is a real estate investment platform offering fractional ownership in blue-chip rental properties, giving investors monthly rental income, real-time appreciation and tax benefits — without the need for a hefty down payment or 3 a.m. tenant calls.
Founded by former Goldman Sachs real estate investors, the team hand-picks the top 1% of single-family rental homes nationwide. Simply put, Ashley can invest in institutional-quality offerings for a fraction of the usual cost.
Each property undergoes a vetting process, requiring a minimum 12% return even in downside scenarios. Across the board, the platform features an average annual IRR of 18.8%. Their cash-on-cash yields, meanwhile, average between 10 to 12% annually. Offerings often sell out in under three hours, with investments typically ranging between $15,000 and $40,000 per property.
Every investment is secured by real assets, not dependent on the platform's viability. Each property is held in a standalone Propco LLC, so investors own the property — not the platform. Blockchain-based fractionalization adds a layer of safety, ensuring a permanent, verifiable record of each stake.
Getting started is a quick and easy process. You can sign up for an account and then browse available properties. Once you verify your information with their team, you can invest like a mogul in just a few clicks.
As for the financial advisor who suggested a HELOC, the host recommended the couple hire a new one.
"This one's an idiot," Ramsey said.
Working with a financial advisor could help those in Ashley's situation meet near- and long-term goals. And for investors with portfolios of $250,000 or more, financial decisions often become increasingly nuanced.
In these cases, working with a financial advisor can help reduce costly mistakes.
For those with portfolios of $250,000 or more, platforms like WiserAdvisor can connect you with vetted professionals who specialize in this kind of planning.
Simply answer a few questions about your savings, retirement timeline and overall investment portfolio.
From there, WiserAdvisor reviews its network to match you — for free — with up to three vetted, reputable advisors aligned with your specific needs.
You can then schedule no-obligation consultations with your matches to determine who is the best fit for your long-term goals.
WiserAdvisor is a matching service and does not provide financial advice directly. All matched advisors are third parties, and specific financial results are not guaranteed.
Ultimately, Ashley acknowledged the couple's spending was out of control and that they need to take a more hands-on approach to their finances. What the couple really needs isn't a HELOC, but a lifestyle adjustment and a way to boost their wealth while maintaining their budget.
- With files from Maurie Backman.
A single line on your car insurance policy could be inflating your premium by up to 30% — here's what to change
Dave Ramsey warns nearly 50% of Americans are making 1 big Social Security mistake. Here's what it is and 3 simple steps to fix it ASAP
Robert Kiyosaki says China is 'dumping' the US as America piles on debt. Fortify your riches with 4 key assets
Here are the 7 top habits of 'quietly wealthy' Americans. How many do you follow?
Join 250,000+ readers and get Moneywise's best stories and exclusive interviews first — clear insights curated and delivered weekly. Subscribe now.
We rely only on vetted sources and credible third-party reporting. For details, see our ethics and guidelines.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.