Heloc?

[SueInBoston]

Is having a HELOC readily available a good idea? I don't need any money at the moment (I have about 3 months expenses in EF), but thinking about getting one just in case. There's no fee involved, I would lose out in the introductory rate since i'm not drawing anything up front.

[disneysteve]

Some people suggest keeping an open HELOC in case of emergencies. Personally, I don't believe in using debt as your EF. If something happens like losing your job, the last thing you need to do is take on debt to pay the bills. That's why you need an EF in the first place - so that doesn't happen.

[JoeP]

We had a HELOC and it was structured to follow interest rates, and bottom out at 3% APR. We got it around 2003 I believe, at the time the markets tanked. We used the money for an addition, and paid it off easily within the 10 years.

Funny thing, we had some outstanding debt (CC) that was bugging us, and our financial advisor saw what we had missed. "Your CC is 12%, and your HELOC is 3%. Write a check off your HELOC when you get home."

IMHO, I would get a small HELOC only if I had at least 1/3 equity. Last thing anyone wants to do is list a house and during the closing calcs be told that the money you were going to roll into your next property has to go toward the HELOC.

[Singuy]

I'm in the camp of supporting the use of a Heloc.

Steve is right if using Heloc as your only EF is probably a bad idea.

You should however, use Heloc as a BACKUP to your EF. Sometimes your emergency may supersede the usual 6 months worth of funds. This is when your Heloc kicks in. Because how our foreclosure process works, it doesn't matter if you owe the bank a dollar or a million dollars, they will foreclose on you if you can't pay (which forces you to sell if you actually have equity in the house). Heloc can prevent foreclosures during dire times and put the control back into your own hands. Since there are no fees associated in opening a Heloc..as well as keeping the balance at 0 which prevents interest from being collected, there's really no downside besides the bank mandating that your house(if paid off) requires adequate insurance.

[SueInBoston]

Thank you all.

I have about 50% equity and think I quality for prime -.25
I hope to never have to use it, but will get one for 'just in case' since no fee or any cost in obtaining.

[MooseBucks]

Thank you all.

I have about 50% equity and think I quality for prime -.25
I hope to never have to use it, but will get one for 'just in case' since no fee or any cost in obtaining.

If there is no fee and you aren't going to use it because you have the credit available I don't see an issue with getting one. Do they charge you when you close it out?

[Singuy]

If there is no fee and you aren't going to use it because you have the credit available I don't see an issue with getting one. Do they charge you when you close it out?

Per Suntrust's rules, you will be charged the closing cost fees if you close the account under 3 years.

[SueInBoston]

I asked at a local bank and was told that there will be a cost if I close it within like 6 months. I asked why and she said something about people using it as a bridge loan between mortgages?

I plan to go with BofA and i will read the fine print

[cornfieldj]

I was asked to write about this last month -- I didn't think it was the greatest idea, but it might work for some people. Our chief financial analyst gave it a thumbs down.

His advice is generally a little conservative, quite solid.

[Singuy]

I was asked to write about this last month -- I didn't think it was the greatest idea, but it might work for some people. Our chief financial analyst gave it a thumbs down.

His advice is generally a little conservative, quite solid.

It is a terrible idea for those living above their means. Now they pretty much found another source to tap into for their frivolous expenditures. HELOC is probably a bad idea for 76%+ of Americans(number of Americans living paycheck to paycheck).

It's like a rewards credit card. Terrible idea for the majority of people..but works like nothing else for those who are responsible.

[GoodSteward]

If you are already responsible with debt(or the lack of it really), then a heloc can be a good debt leveraging tool if the rate is good. However, you shouldn't be in a position that often to need a heloc "on demand."

I have a lot of debt leveraging options known as credit card 0% offers. If I really need to stretch something out short term, that's my go to. The only other place I might could see this is in car financing. 3% is much better than %5-7 on a car, especially used.

Personally, I have no desire to bother with it right now. I don't need another way to get into debt instantly.

[GoodSteward]

It is a terrible idea for those living above their means. Now they pretty much found another source to tap into for their frivolous expenditures. HELOC is probably a bad idea for 76%+ of Americans(number of Americans living paycheck to paycheck).

I agree

76%? That extra 1% was needed for a generic association? lol

[cornfieldj]

It is a terrible idea for those living above their means. Now they pretty much found another source to tap into for their frivolous expenditures. HELOC is probably a bad idea for 76%+ of Americans(number of Americans living paycheck to paycheck).

It's like a rewards credit card. Terrible idea for the majority of people..but works like nothing else for those who are responsible.

I do actually know someone who got a reverse mortgage - not the same thing, I know, but related in that you are using home equity as a piggy bank. Anyway, I live in a co-op building. This crazy woman in her 60s, no retirement savings, somehow got a reverse mortgage.

Not sure how, since I'm told that NYC co-ops do not allow these, but not everything my building does is the smartest thing in the world.

Anyway. She LOST her apartment. She spent like crazy and it was seized by the bank. If the co-op had truly wanted to help her, they would have refused her request and put her in touch w/ financial counselors and the like, but as I said. Poor decisions all around.