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It's about creative financing, too!
Old 09-21-2005, 11:33 AM   #21
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It's about creative financing, too!

Originally Posted by maddythebeagle
What's the deal with all of you with HELOC's. I thought this board was about consume less and save more? and retire early?
Hey, a lot of people use HELOCs as a source of emergency funds.

Instead of letting a few thousand rot at MM rates (admittedly as high as four percent) as insurance against an emergency, that money can be put to better use at higher interest rates (CDs, bonds, or even equities) knowing that a HELOC provides immediate cash for a few weeks/months while figuring out a way to sell off something else. It's cheaper than a credit card and most HELOCs have no closing fees.

After our last NFCU mortgage refinancing, their home office cold-called us to offer a HELOC (for an amount of 15% beyond the balance of the mortgage) just based on the refinancing documentation. There were no closing costs and they even sent the notary to our home to sign the closing paperwork on the back lanai with a frosty beverage. It's popular, too-- the notary said that she was driving over 250 miles a week to closings on an island that's only 600 square miles.

Our HELOC has actually earned a bit of cash. Its initial six-month interest rate was 1.9% so we maxed it out and dumped it into a six-month CD at 2.5%. We paid that off at maturity and it sat at a zero balance for a while until a friend had a money-transfer problem. We loaned her the cash from our HELOC, she used it to solve her problem (thereby avoiding another round-trip airfare to the islands), and we paid the $1.02 of HELOC interest when she paid us back. But she bought us lunch so we ended up saving more (although I guess we also consumed more!).


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