Home equity lines or loans often are touted as a quick and easy way to get out of debt. By leveraging your residence’s value, the pitch goes, you can get money to pay off other bills and you’ll get a tax break, too.

We humans are creatures of habit. I personally don’t really like the debt consolidation theories. This approach can be habit forming. So many households in our country today are using the equities in their homes to finance their lifestyles. They’re repeating the process every few years.

This gets you out of your immediate situation. But borrowing against your house can backfire. The biggest risk: You could lose your home if you default on the loan.

And while equity loan interest generally is tax deductible, it could be limited in some situations. Even when it does provide a tax break, it doesn’t mean it makes sense. Using home equity to catch you up on debt, you know, the day to day spending in your life, is asking for disaster. Lenders happily tell you how much you can borrow. They tout it as a simple debt solution. They make it so easy. But it doesn’t mean you should borrow the total amount. Yet so many people do.

When we buy a house, we use a glorified, “rent to own” plan from the lender, at today’s prices. When we use traditional financing, over the life of the loan, our payment (rent) won’t go up. As time passes, the cost of our house and all other housing is rising. Inflation is at work. We accomplish two things when we purchase a home and don’t cash out any equity.

First, we’re paying off the mortgage (rent) at today’s prices. Ten years from now, we’re paying the same amount per month as the first month our mortgage (rent) started. If inflation holds at the average it has been over the past thirty years, in ten years, our house (and all the other houses) will be worth about ninety percent more than it’s worth today.

If we stay in our home, with our original mortgage, the payment is locked in at the same rate as ten years ago. A new owner would pay ninety percent more today to occupy our home and enjoy the same benefit. Second, we are ten years closer to owning a place to sleep without having to make payments (rent) to occupy it. Our domicile is ten years closer to being rent free and debt free.

When the Joneses use the equity in their house to consolidate other debt, they’re working against themselves. They forfeit the two advantages of buying the home in the first place. They’re moving no closer to stopping the payments (rent) on a place to live. They’re borrowing from the inflationary increases of their investment. All houses are appreciating. The Joneses are borrowing from their future purchasing power, should they decide to buy another house.

The important thing to know is they’re not borrowing equity. They are borrowing the appreciation of housing prices as a whole. They’re borrowing from the value of the future dollar. They’re doing the same thing the federal government is doing. The government can print more money. The Joneses can’t do that.

If we look at it in the opposite direction, every dollar you have today will be worth fifty-three cents in ten years. When the Joneses borrow against their home equity, repeatedly, they stand still. In ten years the equity in the house will only buy a house worth fifty-three percent of the house they have today.

They liquidated the equity in their house. Spending it on a daily basis - dining out four times a week, the ninety-nine dollar cable bill, the leased BMW, the big-screen television, the cell phones for every member of the family and gasoline for the trip to see Grandma. Yes, even for the shirts on their backs.

The Joneses spent their rise in value. They’ll pay more for the same house after its rise in value. Because they spent the money, they weren’t able to lock in the price of housing (rent) at today’s dollars. They’re also no closer to stopping the payment, which is where the real reward is.

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