Dh wants to mortgage our house for a business deal

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amother

Seafoam

Mon, Sep 19 2016, 6:37 pm

Would you agree??

nywife

Mon, Sep 19 2016, 6:47 pm

Can you provide more details?

Maya

Mon, Sep 19 2016, 6:48 pm

Absolutely not. Even without knowing details.

amother

Taupe

Mon, Sep 19 2016, 6:50 pm

NO.

amother

Seafoam

Mon, Sep 19 2016, 6:57 pm

Op here. He wants to start a business and not be an employee since his job is not secured lately. There is a business deal that needs investment and he wants to start with it. I think I need to tell him to try and stay with his boss.

Maya

Mon, Sep 19 2016, 7:04 pm

He can start his own business if he wants to, but only if he finds a way to invest other than to mortgage your home, or any of your assets.

amother

Violet

Mon, Sep 19 2016, 7:04 pm

It depends. It is a very common and sound financial strategy to tap into home equity in order to grow a business or investment. But! You must be 100% sure that this business deal is sound and you can survive any risk associated with it. You cannot put your home on the line! We had close to half a million dollars worth of equity in our home. We took out a line of credit for 300 000$ and used it to buy a couple of investment properties. The revenue from these properties covers all related expenses with some extra cash flow. Our monthly budget has not been affected, but our financial security has ballooned. In the past 5 years, our 300 000$ has swelled to double that. We have no plans to touch any of it. The mortgages are being paid off by the tenants and our children's future is iy''h secure.

amother

Khaki

Mon, Sep 19 2016, 7:05 pm

Absolutely not!!

He should write a business plan and try to get friendly loans or investments.

My father, a respected and successful entrepreneur, gave me two financial rules.
1) never sign anything you haven't read thoroughly and understand.
2) never undo personal stability for a business venture. Meaning NEVER take out a mortgage on your home for a business investment.

Maya

Mon, Sep 19 2016, 7:10 pm

amother wrote:

NOBODY can ever be sure that a business investment will succeed. In fact, something like 80% of new businesses close within the first five years.
Which is exactly why the OP should never risk any of their assets to invest in a business.

Just because it worked out for you doesn't mean it is responsible.

boysrus

Mon, Sep 19 2016, 7:22 pm

NO WAY. Dont do it. Please.

amother

Taupe

Mon, Sep 19 2016, 7:27 pm

Most businesses fail within the first 5 years, as Maya said...

So ask yourself, can you live without your house, is it okay if there is a 80% chance that you will lose your home within the next 5 years, possibly with a lot of your savings?

Because that's the risk you're looking at.

If your husband wants to start his own business, he needs to raise seed money which is independent of your house....

amother

Maroon

Mon, Sep 19 2016, 7:43 pm

I would say it depends.

You should be sitting down with a busness advisor and financial advisor before doing so. Discuss how viable the business is.
Figure out what your payments will be. Can you cover the payments if business makes no money the first 5 years.

My DH and I refinanced our home to invest in a business he was very familiar with, he had worked in it for years, and it didn't require him giving up his day job at all. b'h the investment covers the extra home payments, the daily maintence and upkeep, and a small extra income. Nothing major. But the investment itself will for sure increase in value as long as we don't lose it, its impossible not to. Being that my DH was very involved in the investment I was comfortable.
We both know people who invested in similar areas and lost big, mainly because they knew nothing about it and weren't involved in the day to day.

Maya

Mon, Sep 19 2016, 7:49 pm

I disagree that the success of a business depends on the owner's involvement in it.

WhatFor

Mon, Sep 19 2016, 8:02 pm

Basic investment principle: Never invest more than you can afford to lose. It's plain irresponsible.
If you had a bunch of properties, and wanted to invest one toward a business, then it could make sense. I'm imagining in your case you need your house for survival. If this is actually your situation, if your dh is actually putting your roof up as collateral for a business, then I'd be doubly hesitant about the security of the business because he seems possibly reckless, so his feelings on the business may not be very reliable.
OTOH, and this may not be a popular opinion, you can weigh the factors and decide if you want to take the risk together. If you have children, then this would just be plain selfish, but if you have no children and you and dh decide, hey, dh really hates his boss and wants his own business, so we're both willing to put our house on the line and live in a cardboard box for the rest of our lives for the chance to make this work, then do what you want. (I'm not being sarcastic. Do whatever you both want, if it's just the both of you.)
But if this is such a sound business idea, why not shop it around to successful business people who can actually afford to invest?