How Does A Home Equity Loan Release Work?

A home equity loan is taken out against the worth of the house. It can only be for an amount that is not owed against the house. For example, if a house is worth $125,000 and only $100,000 is owed on the original mortgage, the equity in the house is right at $25,000. This is what is meant by the term equity.

Taking out a loan and using the house as collateral should be a last resort. Although the interest rates are lower on home equity loans, it is best to not jump into a loan which is going to use your valuable property as security. It is advisable to explore all available options before taking out this type of loan.

Once there is a large amount of equity in a home it is good to let it continue to mature. However, some people jump on the opportunity to borrow against it. This does place the home in some form of jeopardy. The more you pay the more the equity builds up and the more you will make if you decide to sell the house. Also, if you continue to pay without taking out a home equity loan the sooner the house will be paid for completely.

A home equity release is basically drawing on a portion of the equity but not all of it. You do not have to get a loan for the entire amount of built up equity, you can release a portion of the amount and borrow only as much as you feel you need. An equity release plan allows you to draw off the equity over a period of years. The amount of the loan can be increased over several years rather than all at once.

If the home owner should die while paying on a home equity release plan, the lender gets all the money back. The interest rates on this type of loan are usually very low because the lender essentially owns the house. This type of loan can be beneficial if one is trying to keep their property but needs to stay in a long term health care facility. Usually the equity has matured and can be borrowed at a very low interest rate. This allows the owner to pay it back even on a fixed income. By taking advantage of a home equity release loan one can keep their house and get the medical attention that is necessary.

Top Private Equity Firms

The Blackstone Group is one of the best and largest private equity firms in the world. It has received a number of top awards such as the Global Private Equity House of the Year (Euromoney Awards 2009). Fee earning assets under management in Blackstone private equity funds totaled $24.3 billion as of September 30, 2010. The firm’s investment strategy seeks out a diverse range of proprietary transactions in companies of various sizes including build-ups, growth capital, rescue financings and buyouts.

The Carlyle Group is rated the biggest private equity firm in the world in 2007, according to a ranking called the PEI 50 based on capital under management. The firm acts as lead equity investor in management-led buyouts, equity private placements, strategic minority equity investments, consolidations and buildups, and growth capital financings. It focuses on sectors in which it has demonstrated expertise such as consumer and retail, energy and power, financial services, industrial, infrastructure, and so on.

Kohlberg Kravis Roberts & Co. (KKR) is the second largest private equity firm in the world. The firm typically makes investments in large businesses with strong franchises, attractive growth prospects, leading market positions and the ability to make high returns on investments. It has made some of the largest completed or announced buyouts in the United States, Denmark, India, Australia, and so on.

Goldman Sachs Capital Partners is a global leader in private corporate equity investing. It invests across a wide range of industries in the Americas, Europe and Asia. The firm seeks to generate superior returns in a variety of situations including leveraged buy-outs, recapitalizations, growth investments and stressed investments across a range of industries and geographies.

Brentwood Associates is a leading California private equity investment firm with an extensive history of investing in leading middle-market growth companies. The firm targets investments in middle-market, consumer-related businesses operating in growth sectors. Its primary areas of interest include: action sports/outdoor lifestyle products; business services; consumer products/services; direct marketing; distribution; education; health, wellness & conscious living; marketing services; restaurants; specialty media; specialty retail; sporting goods.

NBGI Private Equity Limited is a top UK private equity firm with offices in London and Manchester. The firm invests in small and medium sized UK based companies, with a particular interest in the sectors of consumer and leisure; manufactured, industrial and building products; business and support services.

Release Home Equity to Make Your Retired Life Secured

Various types of financial plans and schemes come up every day that can take care of our old age, particularly in the post-retirement phase. After retirement, many constraints come up especially in the financial areas. With a meager pension, it becomes really difficult to meet all the requirements of life. You can release home equity to have a secured and tension-free retirement life. For this, you can look for equity release companies that will eagerly help you to understand the concept, the advantages and the benefits of releasing equity against your property. When compared with other plans and schemes for retirement, to release home equity seems the best option.

When you release home equity, you actually give out your property or a part of your property to the lender against a sum of money. There is an option given to you in terms of taking the money too. The equity release companies have to be informed about the mode of payment you want to opt for. You can either take the total value of the equity release at one time, which will give you lump sum money. If you do not want that and wish to have money paid in installments, you can choose that also. You will get the payment in monthly installments. This will not only save your money but also improve your monthly budget. And most importantly, you do not need to leave you residence after you release home equity. You can stay in the house till your death.

If you want to release home equity, you have to meet some deadlines and satisfy some clauses. It is only then that equity release companies can assist you in releasing equity from your property. The person who wants to release home equity should be 55 years or more of age. Secondly, he/she should be the owner of the primary residence that will be released for equity. The house should be in good condition and should have a decent valuation. Last but most importantly you can only release home equity if you do not have any outstanding mortgage particularly against your property. Fulfilling these criteria successfully will let you release home equity and have a peaceful retired life.

The Balancing Act of Assets, Liabilities and Owner’s Equity

A balance sheet represents a company’s net worth at the end of a certain time period. Many companies will deliver these statements at the end of their natural business year, commonly at the point in their fiscal year where business activities are at their lowest point, or quarterly, and in some cases such as banking, mutual funds, and securities brokers, it is prepared at the end of the business day. The balance sheet is created to state the company’s net worth or to understand the financial condition at that time. The net worth of the company doesn’t necessarily mean the actual “book value” of the company – there’s many factors that determine what a company is truly worth. The balance sheet differs from the other financial statements in that it shows balances at one point in time versus income statements and cash flows which represents figures over periods of time, however, these statements are most commonly listed in sync with one another.

The statement is always broken down into three sections; assets, liabilities and equity. On the actual balance sheet, assets are equal to liabilities and equity, where assets are the company’s resources, liabilities are their financial obligations and equity is the ownership of their assets that have been completely paid for and can be readily turned into cash.

The company’s assets will be listed as current, or liquid, and non-current, or non-liquid assets, and five or more assets are typically reported. Current assets will include cash and cash equivalents, accounts receivables (sales made on credit), inventory of unsold products (at cost). All of the company’s current assets are equivalent to cash, in that, if the company needs cash quickly, usually within one year, they will be able to liquidate these assets. Same logic for non-current assets, except the company cannot liquidate these assets as easily. They include long-term operating assets or the company’s plant, property and equipment (PPE), at cost, less cumulative amount charged off to depreciation expense, amortization, and goodwill.

Now, the company’s liabilities and owner’s equity are listed together. Another way to look at our financial equation is to remember that the equity in the business is what is owned less what is owed (working capital). Liabilities will include accounts payable (owed for credit used), current borrowing (loans), or other current liabilities, usually these are liabilities that cannot be rolled into accounts payable or current borrowing. Non-current liabilities include paid-in capital and retained earnings. Paid-in capital includes money ‘paid-in’ by investors during common or preferred stock issuances where retained earnings is the amount of earnings not paid out as dividends, but retained by the company to be reinvested in its core business or to pay debt.

By understanding the balance sheet, one can then use ratios to have a better feel for how the company is doing financially. Some of the ratios include working capital, current ratio, quick ratio, accounts receivable turnover, days’ sales in accounts receivables, inventory turnover, days’ sales in inventory, and debt to equity ratio. These ratios help investors and owners to quickly understand where the business stands, for example, working capital is an indicator of whether the company will be able to meet its current obligations. The greater the amount of working capital the more likely it will be able to make its payments on time. The debt equity ratio is the proportion of assets supplied by the creditors versus the amount supplied the owner or stockholders. It can be a good indicator of the amount of debt owed and the credit health of the company.

Home Equity Loans and What You Need to Know

There is no debate that the availability of home equity loans is a highly valuable option for home owners in need of extra funds. The fact that a mortgage has been paid consistently for a number of years, and that the market value of the property has increased, means that there is equity available to cash in on.

Turning equity from your home into money that can alleviate financial pressures elsewhere is a logical option, especially when those pressures relate to family health, education and long term security, like paying hospital bills, paying college fees or making another nest egg investment.

The fact is, loans based on home equity are about as safe as anyone can get, with property always considered to be a reliable basis for providing a loan. After all, property appreciates in value, while so many other assets actually depreciates.

However, it is worth keeping in mind that home equity loans are not always the best choice, and if they are chosen, there are factors to be considered, not least the actual form in which the funds are made available.

Home Equity Forms

The first thing to consider is whether or not cashing in on the equity from your home is such a viable idea. There needs to be a clear value between the market value of a home and the balance left on the mortgage.

For example, a home worth USD200,000 with a mortgage balance of USD180,000 will only secure a home equity loan of USD20,000, whereas a balance of USD100,000 will secure a loan of USD100,000. Getting a loan too early will mean a true advantage is missed.

If the latter is the case, then clearly the home owner can gain considerably. However, there are two ways in which the additional fund can be accessed. It is commonly believed that loans based on home equity are available in one lump sum, like a normal loan. However, it is also possible to open a line of credit and to access smaller sums whenever they are needed. This makes it possible to use the equity loan to cover a range of smaller expenses over a prolonged period of time.

The Hidden Charges

When applying for home equity loans, there is a lengthy list of expenses associated with the process that many people are surprised to discover. Just as it is necessary to have property valued and attorneys involved when getting a mortgage, it is necessary to use professional services and face the fees that they charge.

Accessing equity from your home is no cheap process, with administration and lawyer fees to pay, pushing up the cost of getting the loan in the first place.

Get Professional Advice

With all of these factors to contend with, it is advisable to consult experts in home equity loans before signing any loan agreement. Getting loans based on home equity cannot be considered a straightforward transaction, and the value of the money involved means that it should be treated as the major investment that it is.

Without doubt, accessing the equity from your home can provide the financial relief that is truly needed, or can provide the means to invest in the future. Those factors alone can make the decision easy, but it is always worth knowing the facts.

Fast Growing Independent Equity Firms Doing Business in the UK

There are many independent private equity companies based in the UK that are succeeding in making profitable equity investments for their clients. The top companies are the ones that structure client services that are geared towards meeting the needs of and fulfilling the investment challenges faced by businesses and individual customers struggling to meet tough demands in an uncertain economic climate. They are especially well equipped to actively manage their portfolio of businesses through responsible business practices, which result in lower risks and added value for shareholders. Following is a list of only a few of the highly qualified and dynamic investment companies working out of the UK who excel in helping their corporate customers, blue-chip companies, innovative entrepreneurs and international organizations to reach their goals by making solid equity investments that are profitable in the short run as well as long term.

Greshem Private Equity

Greshem Private Equity is one of the leaders in the range of independent and locally based mid market equity investors. The company has earned a worthy reputation of consistent and successful investments and rich partnerships with local management teams. The firm offers regional services that enable it to provide valuable local contacts with regional knowledge that open the doors to new opportunities for long-term success. All business investments are carefully researched to ensure they are based on a solid business model, are flexible enough to withstand a competitive market, are consistent with the generation of a consistent cash flow and can work seamlessly as partners with Greshem representatives. Some of the sectors that Greshem invests in are industrial businesses, energy and environment, consumer products, business support services and pharmaceuticals.

Rosemont Group

The Rosemont Group is a privately funded investment company established by renowned investment entrepreneur Frederick Achom in 2002 and was recently valued at over $40million. Along with a myriad of investments in popular international brands of luxury products and services, the Rosemont Group is active in the UK equity investment market. The experienced team of investment professionals seeks out existing business ventures with high potential and make either capital investments or utilize its own resources to grow the company. Through its careful selection of high potential start-ups and companies on the ground, Rosemont Group creates investments with long-term capital growth and positive cash flow. The team’s expertise and particular skill sets take into account operations and management, sales, strategic business planning, financial consultations and marketing and promotions. The Rosemont Group is well situated to offer either passive support in the realms of capital or direct resources but in both directions the company provides intellectual capital as well as active support at multiple levels in wholly owned companies, joint venture projects and well-formed partnerships. The Rosemont Group specializes in equity investments from $1 – $10 million, but is flexible when it comes to potential projects or promising partnerships that do not fit within that range.

NVM

As the stock market in the UK is on the road to recovery with a slow moving growth in the economy, NVM has taken measures to succeed during the upswing as its investors share in the company’s growth through its list of carefully chosen funds. The company pinpoints potential UK investment opportunities and manages 200m in funds, including Northern 3 VCT PLC, Venture Capital Trusts and Northern Venture Trust PLC. A total of 4.5million was earned from investments in new venture capital funds and profits from sales of investments reached 2.0 million. Positive trading results are impacting the portfolio worth with generally increased values. NVM takes into account the current market conditions by being very careful when selecting new investments and employs a top-notch investment management team to oversee those investments, which ensures a steady maturing of company portfolios resulting in favorable returns to the shareholders. Providing high returns to investors that are both long-term and tax-free through capital growth and good yields on dividends are the focus of NVM investments. Its professional and experienced venture capital executives work out of offices in Reading and Newcastle upon Tyne where they successfully manage the funds and investment trusts.

Graphite Capital

Placing a major emphasis on the mid market companies, Graphite Capital is a one of the top equity investors in the UK. The London based firm became independent in 2001 but its investors have been successfully raising and managing private equity funds since its inception in 1981. Currently under its equity investment management are funds worth more than 1.2billion.

Lloyds Banking Group

One of the more accessible equity investment firms is Lloyds Bank, which works through offices nationwide and specializes in the areas of corporate finance, capital markets, risk management, international trade and banking. On staff are teams of financial professionals whose knowledge base cover a wide swath of sectors including business services, energy, leisure and health, manufacturing and transportation, retail and consumer products, financial institutions and construction and real estate. Its corporate customer base numbers 30,000 and includes blue chip companies as well as entrepreneurs rapidly reaching new business heights.

Deloitte Touche Tohmatsu Limited

Deloitte Touche Tohmatsu Limited (DTTL) is an independent UK company that provides regional equity investment services. The firm’s trademark is its unwavering pursuit of high quality investments and sustaining trust of its clients throughout every level. Deloitte is known for its collaboration, industry expertise, innovation and exceptional client service reaching into such areas as tax consultation, corporate finance and audits.

Private Equity Funds in Renewable Energy

Introduction

There are two main purposes of this article. The first purpose is to discuss a private equity company involved in making investments in renewable energy sector. And the second aim of this article is to discuss the investment of other private equity houses on renewable energy sector. We will discuss this issue in accordance with Daniel Schafer’s article ‘Winds of Change’. The company selected to fulfill the purpose of this article is HgCapital. HgCapital is a private equity firm who is engaged in buying out of small, medium and large size companies all over Europe.

The firm makes investment in all sorts of industries but it has a specialized fund for renewable energy. It invests in five sectors: Industrials, Health care, TMT, Services and Renewable energy. The company was established in 1985 by the name of Mercury Private Equity. It is headquartered in London, United Kingdom. HgCapital has total assets of around $5.2 Billion. It has 80 Employees in its offices in Germany and United Kingdom.

Discussion

HgCapital was the first UK Private Equity fund that involved in investing in renewable energy sector. Today HgCapital is considered to be the largest renewable fund player in Europe in terms of the amount of capital it raised. It established its first renewable energy investment team in 2004 and made its first investment in 2006 after a thorough research of the sector. The Team initially invested in utility renewable project in Western Europe through technologies such as solar, hydro, and onshore wind. For that purpose the company uses ‘fund investment approach for infrastructures’. The company focuses on small hydro and wind projects which are independent of government support. In Scandinavia, the company has become the major owner and player of onshore wind farms.

The renewable energy market is the rapid and fastest growing segment in Europe. It is a potential investment opportunity for the investors. It requires considerable capital investment. Economies of scale and advancement in technology have increased the cost competitiveness of the sector. As a response to these market drivers the company has increased its focus on the use of efficient and effective technologies and the best possible resource sites. This results in lower cost to consumers. In order to establish strategic value and to lower the intrinsic cost the company has decided to invest in industrial scale.

The article by Daniel Schafer’s ‘Winds of Change’ emphasized on the growing interest of private equity funds investment in renewable energy sector. According to the author, Daniel, KKR and Blackstone like HgCapital have discovered a new investment opportunity. As mentioned earlier renewable energy is the fastest growing sector in Europe. Hence it provides attractive and potential investment opportunities for many of the private equity funds. There were overall 70 renewable energy investments by private equity funds in between 2004 and 2006. However the number increased to 170 Investment during 2008.

There has been a lot of activity during this year. KKR, which is a United States based private equity fund, made its first investment in the renewable sector. The very same day Axa Private Equity becomes the fourth largest wind farm operator in France. After a month, another UK based private equity firm by the name of Bridgepoint, invested a sum in wind farms of Spain. In August the same year, Blackstone, rival of KKR invested €2.5 billion for constructing Germany two offshore wind farms.

According to the author one major reason why the renewable sector is a hot spot for investment is because it is immune and least affected by economic cycles. Wind and solar energy does not bear the same demand risk as gas, coal and nuclear power. Even banks are willing to lend for making investments in renewable projects. Renewable energy has become the major power generation. Solar energy is in number second but still behind in terms of cost. In future the author believes that further investment will made for the supply chain of that sector.

Conclusion

The article discusses a private equity company involved in making investments in renewable energy sector. The company selected for this purpose is HgCapital. The firm makes investment in all sorts of industries but it has a specialized fund for renewable energy. It established its first renewable investment team in 2004 and made its first investment in 2006 after a thorough research of the sector.

The article also discusses Daniel Schafer’s article ‘Winds of Change’. The article is focused on the investment of private equity houses on renewable energy sector. The private equity houses discussed in this article are KKR, Black stone, Axa, and Bridgestone. Renewable energy is the fastest growing sector in Europe. Hence it provides attractive and potential investment opportunities for many of the private equity funds. According to author, one major reason why renewable energy sector is a hot spot for investment is because it is immune and least affected by economic cycles. Being the fastest growing sector in Europe it provides an attractive and potential investment opportunity to private equity fund managers and companies.

Creative Home Equity Strategies For Retirement

The Baby-Boom generation is nearing retirement and it is clear that millions of aging Boomers are financially under prepared. Reasons are many – poor savings habits, rising medical costs, the demise of guaranteed corporate pensions, and the dreaded squeeze faced by many: i.e. having to pay college costs for their children, care for their elderly parents, and save for retirement, all at the same time.

The outlook is not entirely bleak, however. One bright spot that may help Baby-Boomers achieve secure a retirement is the record high-level of home ownership and the related growth in home equity. Home equity, the difference between debt owed on a home loan and the value of a home, accounts for at least fifty percent of net wealth for more than half of all U.S. households according to the Survey of Consumer Finance. In much of the country, historically low interest rates have spurred refinancings and kept housing markets strong, both factors in boosting home equity growth.

Unfortunately, too many homeowners tap into home equity savings through cash-out refinancings, second-mortgage home equity loans, or home equity lines of credit (HELOCs) to pay for vacations, new cars, and other current consumption expenses producing no long-term wealth appreciation. These homeowners may be seriously eroding their ability to finance retirement. By cashing out home equity now, they are spending what has been a vital cushion in old age for past generations.

Homeowners who manage their home equity prudently, on the other hand, will enter retirement years with a substantial nest-egg to complement their other retirement savings accounts. This article describes seven specific ways in which the home equity nest-egg can be used to enhance retirement income planning.

1. Downsize – The traditional way to tap home equity in retirement is simply to move to a less expensive dwelling. The strategy is straight forward: sell your home for $250,000, replace it with one costing $150,000 and you’ve freed up $100,000. Within IRS guidelines, you can now sell your home and realize up to $250,000 in tax-free profits if you’re single; $500,000 if married.

This strategy makes even more sense when you consider that maintenance costs and the headaches of a large family-home are done away with for the retiree. Yet emotional attachment to a home is strong and we all know retirees who simply refuse to move from the home they have lived in for so many years.

2. Reverse Mortgage – Retirees remaining in their homes can still tap their home equity as a source of retirement income. An entire industry has grown up around the “reverse mortgage” concept which allows seniors over 62 to tap into their home’s value without making any repayments during their lifetime. A reverse mortgage (also known as a HECM – Home Equity Conversion Mortgage) requires no monthly payment. The payment stream is “reversed”: instead of making monthly payments to a lender, a lender makes payments to you, typically for the remainder of your life, if you continue to reside in the home.

Origination fees and closing costs for reverse mortgages are high. Some people try to avoid these fees by instead borrowing against their home equity for retirement living expenses with a regular home equity loan or home equity line of credit (HELOC). However, this is not always a smart strategy. The reason is that with either a conventional home equity loan or a HELOC loan, you will have to make regular monthly payments that may be at a higher interest rate than can be earned on the loan proceeds without undue risk. Also, if you use loan proceeds to pay for routine living expenses, you risk running out of money. A HECM, on the other hand, can be structured to provides income for the rest of your life.

There are many pros and cons to reverse mortgages and a complete discussion is beyond the scope of this article. Suffice it to say that the reverse mortgage strategy is a sound one for many retirees. As with any major financial decision, it is essential that you seek qualified advice before committing to any particular deal. Federal guidelines, in fact, require reverse mortgage applicants to participate in counseling sessions prior to taking out a loan.

3. Purchase Service Years – One of the lesser known facts of financial life is that many public and some corporate pension plans allow their employees to purchase additional years of service credit – sometimes at bargain prices. For example, for an up front lump-sum payment a teacher with 20 years service might be eligible to buy 5 additional years and thereby qualify to retire early.

The cost of buying service years can vary greatly from plan to plan. A dwindling number of pension plans require only a fixed dollar payment for each service year purchased regardless of age; however, most plans now have an actuary compute the cost based upon the employee’s age, income and other variables. In either case, it is worthwhile to learn about these options. Although up front costs are steep, you may find that financing the purchase of service years through a home equity loan or HELOC is a sound investment. Bear in mind you are looking at the purchase of an annuity: in exchange for an up front lump-sum payment, you are promised a steady stream of future payments. As with any major financial decision, always seek qualified financial advice.

Also, inquire about other non-pension benefits you may qualify for by purchasing additional service credits. For example, some employers base retiree health care benefits on the number of years of service. Purchasing additional service credits may qualify you for valuable benefits you might not otherwise be eligible for.

4. Company Match – According to the Investment Company Institute, 75.5% of companies match their employees’ 401k plan contributions. The most common match level is $.50 per $1.00 employee contribution up to the first 6% of pay. Yet despite the “free money” allure of company matches, a surprisingly large number of workers do not participate in their companies’ 401k program or do not contribute enough to receive the full employer match.

Workers electing not to join their employers’ 401k plans cite financial constraints as the primary reason. Yet the long-term financial impact of non-participation will likely be far more significant than the short-term discomfort of re-arranging budget priorities. Not only do non-participants miss an immediate and guaranteed 50% return on their investment, they also lose time and the benefit of compounding on their retirement savings growth.

In the right circumstances it can be a sensible to borrow from a home equity line of credit (HELOC) to fully fund a 401k. This strategy involves moving funds from one savings category (home equity) to another (retirement savings) and makes most sense if: 1) the employer match is significant, 2) HELOC interest rates are relatively low, 3) the loan can be repaid in a relatively short period either from higher expected income and/or adjusting budget priorities and, 4) the participant commits to adjusting lifestyles and priorities so that future 401k contributions are made from current income.

Another consideration is whether itemized deductions (including mortgage interest) fall above the IRS standard deduction amount ($9,700 for couples in 2004). Many long-time homeowners are at the tail end of their loan amortization meaning that nearly all of their monthly payments go towards principal. For instance, during the last five years of a typical 30-year mortgage, only about 14% of the total payments will be interest payments. This means little or no tax deduction benefit is being realized – one of the principal benefits of home ownership. In such cases, additional home equity borrowing (or refinancing) may result in tax savings to offset investment risks.

5. Avoid 401k Loans – One popular features of many 401k plans is the ability to borrow from your vested balance for purposes such as a car purchase, educational expenses, or a home purchase or improvements. More than half of all 401k plans offer the loan option, typically allowing loans up to 50% of the vested account balance or $50,000, whichever is less.

Many people take out 401k loans believing they are better off because they will be “pay interest to themselves” rather than a bank. But the truth is that a 401k loan isn’t really a loan at all; rather, you are spending down your own hard-won retirement savings. And the interest you pay to yourself won’t come close to replacing the interest lost by not having the funds invested in retirement account assets.

The bottom line is that 401k loans are almost never a wise financial move and even less so for homeowners having the option to borrow against home equity instead. Among other advantages, interest paid on home equity loans is generally tax-deductible whereas interest on a 401k loan is not.

6. Borrow to Fund IRA Before April 15 Deadline – Financial planners generally agree that it is best to either: 1) make contributions to an IRA as soon as possible (e.g. January 1) to maximize the power of compounding or, 2) make steady equal contributions throughout the tax year to gain the benefits of “income-averaging”. Yet many people find themselves up against the April 15th tax deadline without adequate cash and, so, fail to make any IRA contribution for that tax year. In some cases, people miss the opportunity even though they are in line to receive a substantial tax refund within weeks.

Unfortunately, when the deadline passes, the opportunity to make an IRA contribution for that year is lost. The foregone compounded impact on retirement savings can be huge. Consider that a 35-year old who misses a $3,000 IRA contribution will have $30,000 (assuming 8% return) less in his retirement account at age 65. It is sensible, in many situations, to use a HELOC loan to finance an IRA contribution rather than miss the opportunity forever. The case for borrowing to fund an IRA is particularly strong if the loan can be repaid quickly with a tax refund.

7. Take Advantage of IRS “Catch-Up” Rules – Congress created “catch-up” provisions to give older workers nearing retirement an additional tool to bolster retirement savings. In a nutshell, catch-up provisions for the various tax-advantaged retirement programs (i.e. IRA, 401k, 403b, 457, etc.) permit workers to make supplemental (“catch-up”) contributions starting in the year the worker turns age 50. The amount of allowable annual catch-up varies by the type of retirement program and is summarized in this table.

If, for example, you are 55 and plan to sell your house when you retire at 62, it may be worthwhile to borrow on your HELOC today to catch-up on funding your retirement account. HELOCs generally allow for interest-only payments for several years meaning you will have to pay relatively low, tax-deductible interest until the house is sold and you are able to pay the principal balance. Again, with this strategy, you transfer funds from one savings category (home equity) to another savings category (tax-advantaged retirement account) to gain the advantage of higher-yield retirement account investments compounded for a longer period.

The strategies outlined in this article certainly do not make sense for everyone. If you have trouble handling debt or controlling spending, taking on more debt is absolutely the wrong thing to do. On the other hand, if you are a financially responsible person, these seven strategies may help you think critically about your own situation and about ways the equity in your home might be used to enhance your retirement income planning.