The 5 worst ways to use your home equity

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For most of us, our home is the most valuable thing we own. That's why our experts urge you not to squander your equity in your home by:

Gambling.

As ridiculous as it may sound, people have used home equity lines of credit and put the roof over their heads at risk to finance a gambling trip to Las Vegas and to buy lottery tickets. You might as well set a match to your money or flush it down the toilet -- and then spend the next 10 years paying for it with interest. We won't make any moral judgments here about gambling, but suffice it to say that you should never gamble more than you can afford to lose. We think it's a safe bet that the vast majority of people can't afford to lose their house.

Buying speculative investments.

If it sounds too good to be true, it probably is, right? Keep remembering that every time you think about using your house as collateral to play the stock market, invest in secret, new technology or buy a racehorse. The risk associated with speculative investments is incredibly high. The same rule applies here as for gambling: Don't invest more than you can afford to lose.

Vacationing.

Vacations are wonderful things. They're an important part of life. But there's a much better way to finance a vacation than borrowing money from a home equity line. It's called saving. Yes, it takes longer but while you're saving, your money is actually earning interest instead of you having to pay interest while paying back a loan. And your trip will be that much sweeter knowing that it's completely paid for.

Paying for a wedding.

According to statistics from the wedding industry, the average cost of a wedding these days is around $26,000. Are we the only ones who think that's insane? Why would you spend that kind of money on a party? But, to each his own. If you have the money and all your other financial ducks are in a row, then knock yourself out. But footing the bill with a variable-interest loan that puts your house at risk? This is one time to say, "I don't."

Lavishing yourself with luxuries.

Yes, it would be wonderful to drive a (fill in the name of your dream car) or have a membership at an exclusive, private country club. But financial responsibility requires living within your means. If the only way you can afford to pay for things is by borrowing money from your home equity line, you really can't afford them. As it relates to vehicles, they start losing money the minute you buy them, so don't risk an asset that increases in value (your home) to finance one that loses value (a car, a boat, a recreational vehicle, etc.) Far better to secure those loans with the item itself. Then, if something happens and you can't make the payments, the bank will take back the vehicle and not your house.