HELOC

[REWahoo]

WZD wrote

RE: HELOC - I don't know why everyone doesn't have these as insurance. I just waited for a bank to offer a no-cost/no annual fee promotion and took it. Now that I am semi-retired, I probably would not qualify anymore, but it is still there if I need it ( most of my assets are illiquid).

Agreed. A HELOC is a great safety net. I jumped on a "free" home equity line of credit a few months ago for just the reasons you mention. It was on the list of things I need to do the year before I ER. Nice to know it's there if you ever have a need for it.

REW

 

[brewer12345]

I go back and forth on this. On one hand, having a liquidity backstop in case the poop hits the fan is a good thing. OTOH, if I have 6 figures worth of liquid, after tax assets, do I really need another $100k available?

I'll probably end up getting one eventually, but I will have to think about it.

 

[peggy]

We have a $25,000 HELOC in place, which we used to pay off a couple of other, higher-interest debts (back in the debt days), and then just left sitting there.

It's nice to know we have it, but I can't imagine the kind of emergency that would take us through our emergency fund (about $20,000) and into the HELOC, since DH and I both have short and long term disability insurance in addition to medical, homeowners, and auto insurance.

It all boils down to the "sleep well" factor. Having an extra $25,000 available helps us sleep well at night, and so we keep it.

 

[John Galt]

I can't get a HELOC but think it is a good idea to have one in place. As a substitute, I view my 150K
in CC credit lines as emergency money. Hopefully
I will never need the money.

JG

 

[KB]

I am trying to decide if I should get a HELOC. I might be in the layoff pool in February.

I own my house outright and have 35,000 in a MM earning 3%. This is enough to live on until March 2006 which is the soonest I can sell my house without any capitol gains penalties. I'm thinking of selling my house at that time and ER living off the proceeds until my pensions kick in.

ON the one hand I don't like the idea of having a lien on my house. On the other hand, I like the idea of having a LOC available.

What would you do in my situation?

 

[Hyperborea]

What would you do in my situation?

If you can get one for no cost (if your FICO is good and since you won't be making it a high loan-to-value HELOC you should) then do it. It is essentially free insurance. It won't cost you to have it and there may be a situation where you need the money but don't want to or can't sell the house right away. Again, if your FICO is good, you should be able to get it at Prime+0 or maybe Prime-0.25.

 

[brewer12345]

Actually, Charles Schwab hos opened a bank subsidiary which offers HELOCs to well-qualified borrowers at excellent rates. If 70% LTV is OK with you, they do a HELOC at prime minus .75% with a max rate capped at 12%. Steal of a deal for renting money if you are happy with the LTV and have the credit score.

 

[Nords]

Get the HELOC.

After we refinanced our mortgage, our credit union contacted us to offer the rest of the home equity as a HELOC.

They used the refinancing documents to process the HELOC. Closing costs were zero. The notary was even sent to our house, so we signed the paperwork on the back lanai over frosty beverages.

As earlier posters have said, I doubt we'll ever use it but it's nice to know that it's there. And if you're contemplating unemployment, do the HELOC before the employment-verification part of the application gets complicated.

These must be pretty popular. The notary said that she puts 30K miles/year on her car going from closing to closing. Since Oahu is only about 600 sq mi, that's a lot of HELOCs.

 

[Dan Scott]

I am trying to decide if I should get a HELOC.  I might be in the layoff pool in February.

I own my house outright and have 35,000 in a MM earning 3%.   This is enough to live on until March 2006 which is the soonest I can sell my house without any capitol gains penalties.  
[/quote]

The IRS allows for you to take a reduced capital gains exclusion on the sale of a residence if you meet certain tests. One is that you had to sell before your two year period was up due to a change in health or place of employmnet or for certain "unforeseen circumstances, such as becoming eligible for unemployment conpensation or a change in employment status that leaves the taxpauer unable to pay reasonable household expenses and housing costs.

re2boys

 

[KB]

I've got the FICO score (around 800) and found a loan with no fees except the 250.00 early pay off fee (before 3 years).

Thanks for the info about selling before 24 months. That adds a new dimension to my ER plans. I'll have to think that one over.... My youngest will be moving out in June when he graduates from HS.....maybe I'll be able to move my plans up.

Kinda scary.....maybe I'm not ready to ER yet. I better think about this.

 

[Bob_Smith]

KB and Dan Scott, where are you getting 3% in a MM account?

 

[KB]

I'm in GMAC Demand notes, which unfortunately are not open for referral at this time. I worked for EDS when it was owned by GM and got in at that time.

 

[fln]

KB and Dan Scott, where are you getting 3% in a MM account?

Not them but I'm in Access National MM @3% APY. I'm also in Superior Savings of New England @3.05 APY but this one is a saving account.

 

[Bob_Smith]

Thanks fln.

 

[Craig]

You can also put a LOC on rental properties. We have LOC's on 2 paid-off rental properties, at 75% LTV, plus a HELOC. Costs us nothing to have them, and it is a nice hedge considering the illiquid nature of rentals.

 

[polloloco]

I can get a HELOC for 2 %/six months. Up to 50 K. Thinking about taking it and see what can be done in the stock market for that period of time. What do the rest of you think about the first six months prognosis for the market?

 

[charlie]

Hey polloloco, that is just about the dumbest idea
I have heard all year.

Cheers,

Charlie

 

[Nords]

I can get a HELOC for 2 %/six months. Up to 50 K. Thinking about taking it and see what can be done in the stock market for that period of time. What do the rest of you think about the first six months prognosis for the market?

Sounds like a good idea if you're buying a six-month CD yielding more than 2% (after taxes). I'm not sure which stock market you can find that in...

 

[ripper1]

ripper1

Well, about 2 years ago I got this smoking hot heloc from third federal. It is prime -1 or 2.25%. I had my house paid for but realized I had to help my kids with their college tuition. So I also get the student loan interest deduction. It is really cheap money at this point. I retired this year and my pension at this point seems to be enough except I did go out and buy my dream car. The debt on that is 830 for the next 20 months at 0%. I have 40,000 in cash reserves. I don't know if I want to cut my cash reserves essentially in half at this point as I may have to pay for a wedding soon. My other option is my 457 tax deferred account. If I start taking withdrawals to meet this obligation it will be just under 4% a year. Afterwards I could continue to make the withdrawals and put in savings or just stop withdrawals at that point. I'm not sure which would serve my purpose. Anybody out there have any ideas?

 

[Nick59]

Flexibility is a good thing as long as it's used responsibly.

I paid off my mortgage a few years ago, and got a HELOC which has (currently) ~50% of equity availability cap.

I drew down <5% of current house value to assist in the purchase of a house for a parent; it's on an interest only option, at 2.75%, and I'll pay it off when that parent passes from this world...

I drew down another <5% this year for a major home improvement, and utilized it as a cash flow vehicle -- I'm paying it off over a 2 year period, again at a 2.75% interest rate.

It's nice to have, that's for sure.