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Can a HELOC be called just because we retired?
Old 02-21-2017, 12:20 AM   #1
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Can a HELOC be called just because we retired?

DH and I took out a HELOC 3 years ago to finance a home remodel. The rate is still attractive - 3.49% - so we are still carrying a balance on it. In addition, we have credit capacity on it that we would like to keep as an "emergency cushion" in case the market crashes and we don't want to sell assets to fund our cash flow needs.

We recently RE'd and I was wondering if we are obligated to disclose our retirement to our mortgage bank and if so, would they be likely to "freeze" or call our debt? We have excellent credit (scores over 800) and our financial assets are about 10x our total HELOC capacity and 45x our HELOC outstanding balance. It seems the bank would have little incentive to reduce or eliminate our HELOC as long as we are current on payments and maintain our credit score, but I am wondering if the bank would likely take action to reduce their risk if they knew we no longer have W-2 incomes?
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Old 02-21-2017, 12:51 AM   #2
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I think you will be just fine. Many other people are in a similar situations. As long as you have the ability to pay I don't think you'll have a problem, but check your loan documents to be sure. Remember, the loan itself is secured by the property not your actual income.
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Old 02-21-2017, 06:28 AM   #3
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Loans and lines are underwritten on income, assets, credit, etc at the time that you apply. If circumstances change or everything goes sideways after you close that's the risk the bank takes. It's good planning to obtain a standby line of credit prior to retirement. Two thumbs up!
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Old 02-21-2017, 07:41 AM   #4
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DH and I had an outstanding HELOC when I retired (he'd been retired for many years before). It never even occurred to me to tell the bank- I just kept making payments on time and they didn't care. It was paid off when we sold the house in mid-2015.

I suspect it might be trickier to get one now but not impossible- my predictable income (SS Survivor benefits plus two small pensions) is pretty respectable.
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Old 02-21-2017, 08:52 AM   #5
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I have never heard of anyone being required to disclose their retirement to a loan company after a loan is taken out.
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Old 02-21-2017, 09:02 AM   #6
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I applied for and received one after retirement. They don't care, there's nothing in the one I had that said I had to report changes.
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Old 02-21-2017, 09:46 AM   #7
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We never thought to disclose this and I don't think they care as they recently offered to extend the term on the loan (we accepted). We have used it mostly as a cash flow & tax management tool and have a declining balance that we will be paying off in March. I expect that we will use it less in the future and rely more on our savings and Roth accounts to smooth taxable income.
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Old 02-21-2017, 10:51 AM   #8
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My experience was sort of a "don't ask, don't tell". The monthly payment was taken out of my checking account. As long as they got the payment I do not think they cared.
After I retired, I converted the unit to a rental, and took out enough equity to buy our retirement home.
I sold the place a few years ago, and paid off the balance.
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Old 02-21-2017, 12:52 PM   #9
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Let me try and answer the question put forth and then explain a bit...

YES, of course they can call your HELOC... it does not matter if you retire or not. They have the right to call at anytime for any reason. (note.. if you have paid a fee to have the line open then there is a set time period and it is harder to call)

Now, WILL they call is a different question.... more than likely they will not... as long as you have a good credit rating and are paying the payments there is no reason to call...

But, I will give two things that might get you thinking....

When the housing crisis occurred, my HELOC was frozen and I could not borrow any more money from it... I was still working... the house did not have any other debt and it was worth 4X what I had outstanding... there was nothing I could do (I did not care since I did not need any money, but hey)....


Another thing that I have noticed is that most all of my credit cards are asking me to update my salary Well, I do not have a salary... and my taxable income is LOW.... I just ignore the requests so far... and of course pay my bills.... I do not know if they plan to do anything or not...
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Old 02-22-2017, 01:11 AM   #10
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Thanks to all for the comments. Sounds like I can take this off my worry list.
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Old 02-22-2017, 08:13 AM   #11
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Quote:
Originally Posted by Texas Proud View Post
Let me try and answer the question put forth and then explain a bit...

YES, of course they can call your HELOC... it does not matter if you retire or not. They have the right to call at anytime for any reason. (note.. if you have paid a fee to have the line open then there is a set time period and it is harder to call)

Now, WILL they call is a different question.... more than likely they will not... as long as you have a good credit rating and are paying the payments there is no reason to call...

But, I will give two things that might get you thinking....

When the housing crisis occurred, my HELOC was frozen and I could not borrow any more money from it... I was still working... the house did not have any other debt and it was worth 4X what I had outstanding... there was nothing I could do (I did not care since I did not need any money, but hey)....


Another thing that I have noticed is that most all of my credit cards are asking me to update my salary Well, I do not have a salary... and my taxable income is LOW.... I just ignore the requests so far... and of course pay my bills.... I do not know if they plan to do anything or not...
Great post.

I hadn't thought about the credit card situation. All of my CCs go back to when I was working. Like you, I pay them all off every month, and have for decades. In fact I've never carried a balance forward, ever.
My income is a lot lower now, in retirement . If I get any of those questionnaires about current income, I'll just ignore them.

thanks
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Old 02-22-2017, 08:30 AM   #12
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I know this is just a single data point but we haven't received any inquiries from credit card companies regarding our income.

Of course, what really is our income. We bought a truck last year and I had to fill out this form requesting our "yearly income". I told the salesman that I didn't know what to put down as our income could be almost whatever I want. He gave me a "number" to fill in and that took care of that.
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Old 02-22-2017, 08:45 AM   #13
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Most financial institutions are there to loan money.

As long as you meet their initial underwriting standards and pay on time, they don't care what goes on in your life.

Just go and enjoy your retirement.
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Old 02-22-2017, 08:53 AM   #14
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We were ready to sign for a HELOC last year just before DW retired. We read the small print and it did require to notify them if there were any substantial changes to our income. It also had other restrictive clauses dealing with insurance claims and such. We shredded the paperwork.
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Old 02-22-2017, 12:22 PM   #15
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Originally Posted by misanman View Post
I know this is just a single data point but we haven't received any inquiries from credit card companies regarding our income.
I have gotten a few, and have ignored all of them. None of the issuers have closed the accounts.

Also have a HELOC that I opened in 2013, and haven't heard a peep from them after retiring (PenFed). BUT...I haven't used it, either. I keep it around for a short term solution for any LARGE expense that might pop up that would require liquidation of equities.
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Old 02-22-2017, 03:13 PM   #16
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We got our HELOC while I was retired and just before my wife retired. We were getting it for a cash flow problem so my wife could retire in July. Turned out to be moot as DW decided to work until November and both the cash and HELOC came in mid-July. We'll keep the HELOC to manage income over the next 10 years.

For those getting pensions, save your pension benefit letter. It's proof of your pension as a source of income for life. The pay stub alone wasn't enough.
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Old 02-25-2017, 03:33 AM   #17
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Thanks for all the responses. Very reassuring.
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Old 02-25-2017, 05:15 AM   #18
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We applied for a Heloc last summer and were upfront about our retirement status. Since we were applying with our local credit union, they had access to a snapshot of our automatic pension deposits, as well as records of deposits from retirement accounts, so we were approved without much further ado.
One of our credit cards has asked for income verification updates also, like a previous poster mentioned. I have ignored the request and have simply continued paying on time.
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