Is this a sound investment model ? (see below)?

My wife and I have 2 small kids, a comfortable savings and significant equity in our house which is our only debt (5.5% fixed over 30 years) We are each contributing the max in our employer 401k's and after all the bills are paid we have about $600 left over each month.

We are considering taking a $65k home equity loan at 7% for 15 yrs. and investing the cash in a mutual fund portfolio targeting a 10-12% return. We will use the $600 per month mentioned above to service the debt. With a 15 yr. time horizon we think the market should allow the expected return. I have limited financial knowledge but this seems to make sense. Am I missing something?

I wouldn't take out a HELOC to invest for your future. If you are using a financial advisor for your investments, they will advise you the same way. Use the $600/month extra that you have and begin to dollar cost average into the market. If the market continues in the same way, you will be buying more shares as time goes on. Expecting a 10-12% return in the current market situation would not be a realistic goal starting out.

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