How big is your heloc line of credit???

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Don't have one. Don't want one. Not interested in taking out debt against my home.

a line of credit isn't debt unless you spend it. we have one in case of dire emergency - its nice knowing its available if we need it.

Going into debt against my home during a time of dire emergency is scarier to me than the other options (pulling from retirement/Roth principle, credit cards, etc). When I'm in the midst of a crisis, the last thing I want to do is put my house on the line.

You don't understand finances very well, do you? Having a HELOC is just like having a mortgage. If you had a mortgage, you had debt against your home. Was that so scary?

We paid off our mortgage very quickly and don't intend to go back into debt on the house. It wasn't "scary" to have a mortgage, but it was something that was always a "What if we lost a job?" question. So I wouldn't choose to go back into that. Cash in the bank helps me sleep at night.

It's okay if you feel that way, but it's irrational. The benefit of a HELOC is that the rates are fairly low and usually very stable. I'm the one who has a 500k unused HELOC as emergency fund. The benefit of this is that it gives me another option for quickly accessing a large amount of money. Of course I would never take out a HELOC and incur interest expense unless I needed it. But say I found myself in that situation, having to make the tough choice of liquidating an asset during unfavorable markets, or incurring hefty transaction costs selling something in an accelerated time frame - these can be avoided if I simply use the HELOC as a cushion, a low cost temporary gap funding method that allow me to have more time to gain more favorable asset liquidation returns. This is the very definition of an Emergency fund: money you need due to time constraints, not due to lack of net worth. Cash in the bank is what keeps me up at night: that's dead money not making a return.

To the PP who got a HELOC, foreclosed, bought the condos, etc - you have a much bigger tolerance for risk and upheaval than I do. And I guess it paid off. Although it seems unethical to have used essentially "stolen" money to do that transaction, I'm surprised they couldn't go after you on that.

Totally agree. The people who say "I don't ever want debt because debt is evil" do not understand that debt can be used as a tool. I cannot imagine not being able to sleep at night just because I have a mortgage. That's a bit over the top in irrational fear. Even without a mortgage, if a person loses his job, he still has to pay real estate taxes and insurance on his home. BTW, you can have cash in the bank AND have a HELOC. The two aren't mutually exclusive.

[Anonymous]

Anonymous wrote:

Totally agree. The people who say "I don't ever want debt because debt is evil" do not understand that debt can be used as a tool. I cannot imagine not being able to sleep at night just because I have a mortgage. That's a bit over the top in irrational fear. Even without a mortgage, if a person loses his job, he still has to pay real estate taxes and insurance on his home. BTW, you can have cash in the bank AND have a HELOC. The two aren't mutually exclusive.

+1

$300k HELOC here. Currently untouched.

[Anonymous]

Was $250k on top of jumbo loan. Now $0. DH earns bonuses in great years. Used those funds to pay off over a few years. Closed account.

[Anonymous]

Have never considered a HELOC. Idea of loan against home in case of emergency is frightening. Suppose you do have to tap into the HELOC, what kind of emergency would that be? A job loss, now no job and tapped into HELOC and can't pay back HELOC or mortgage. I can't imagine the necessity of having a 500k HELOC on my home. I save my money and keep it in the bank for emergency. Cash is quicker than any HELOC out there and doesn't come with interest charge. If you have an emergency that requires that much money you just put the roof over your head at risk.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:Don't have one. Don't want one. Not interested in taking out debt against my home.

a line of credit isn't debt unless you spend it. we have one in case of dire emergency - its nice knowing its available if we need it.

Going into debt against my home during a time of dire emergency is scarier to me than the other options (pulling from retirement/Roth principle, credit cards, etc). When I'm in the midst of a crisis, the last thing I want to do is put my house on the line.

depends. I was over under on a $600k home in Las Vegas but had a $250k heloc. Couldn't get a refi on my primary, so I took the heloc, bought 6 condo units nearby at 1/4th their value a year prior and walked away from the house. It went into foreclosure a year later, I sold a condo for 250% more than I paid (kept the other 5) and used the funds to buy the house back from the bank. Sure I had the foreclosure hit on my credit but I walked away with what I eventually solid for about $3,5M total. Worth the trade.

Scum

[Anonymous]

Anonymous wrote:Have never considered a HELOC. Idea of loan against home in case of emergency is frightening. Suppose you do have to tap into the HELOC, what kind of emergency would that be? A job loss, now no job and tapped into HELOC and can't pay back HELOC or mortgage. I can't imagine the necessity of having a 500k HELOC on my home. I save my money and keep it in the bank for emergency. Cash is quicker than any HELOC out there and doesn't come with interest charge. If you have an emergency that requires that much money you just put the roof over your head at risk.

A mortgage is a loan against your home. Millions of households have them. It's is not frightening. For the record, you are given a checkbook with your HELOC. It is just as quick as getting out cash from the bank (if not quicker) once it's set up. But regardless, let me give you some scenarios where a HELOC would be useful in an emergency.

1. Let's say you have $50K in an emergency fund sitting in a money market and you have $200K in your 401K. And you have a HELOC set up for $100K (no interest is paid until you actually borrow against it). An emergency strikes and you need $60K. What do you do? You withdraw your emergency fund money but you still need $10K. Should you borrow against your 401K and incur penalties? Use a credit card with high interest rates? Or should you borrow against your HELOC? Remember, the HELOC repayment is spread over a long term and interest rates are fairly competitive, so monthly paybacks are small.
2. Suppose you've been saving up for a large purchase, and 4 years ago you you bought some 5 year CDs paying 5% for that purpose. But the need comes up to buy that purchase sooner. Say that HELOC rates are currently 3%. Should you cash in your CDs early to make the purchase or use your HELOC and take advantage of the lower interest rate?
3. Let's say you're very prudent and want to keep a large emergency fund of 18 months' worth of expenses because your job is a bit shaky. Unfortunately, You only have enough money for 6 months' savings. Is it wise to open up a HELOC while you still have a job and use it as "backup" as an extension of your emergency fund? Or should you not have it at all? If you don't have it, what will you live on after 6 months if you lose your job? Think of it as a second security step that you hope you won't need but it's there if you need it.
4. Suppose you have lots and lots of money but it's tied up in investments. You need $100K TODAY for an emergency! Luckily, you can write a check from your HELOC because you can't wait a few days to withdraw money from some of your investments.

Many responsible people use HELOCs. They are a great alternative to credit cards in an emergency. They are good to cover you quickly for a few days or a week or a month until you can access money from a different account. Think of it like this. If you have a $200K mortgage on a $400K house and you need $50K for some reason. It's like now having a $250K mortgage on a $400K house. Sure, using it like an ATM to go on vacation or build your dream $50K kitchen may not be responsible. But having it as backup in an emergency or using it like a bridge loan until you have access to money that is tied up is very responsible.

[Anonymous]

Thank goodness for my HELOC - had a 20K balance, but husband is divorcing me and suing for another 150K. I'm paying it just to get him to leave!