Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Re: How do you use your HELOC?
Old 04-19-2007, 10:09 AM   #21
Recycles dryer sheets
 
Join Date: Jun 2006
Posts: 133
Re: How do you use your HELOC?

Quote:
Originally Posted by Financial Jungle Guy
Can you elaborate? Which one is risky? The stocks, the loan or both?

I figure it cannot be the stocks, since you are prepared to buy them in the future. The stock market doesnít become safer a couple of decades from now. In fact, itís safer to buy them now with time is on your side.

It canít be the loan either, if the dividends cover the after-tax interests. Basically you let dividend increases propel your retirement cash flow. The earlier you start, the more time you have to compound.

Don't get me wrong. I'm not trying to persuade people to leverage if they don't feel comfortable.
Loosing cash is sad. Loosing loaned money is a disaster. I have learned the hard way that borrowing for an investment exponentially increases risk. If your math is off more than 10% it will prevent you from future saving. The risk isn't worth it, just use plain old cash.

You are much better off lowering you debt load and investing with pure cash. Which is really at the heart of the LBYM concept.
__________________

__________________
rw86347 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Re: How do you use your HELOC?
Old 04-19-2007, 11:08 AM   #22
Dryer sheet wannabe
 
Join Date: Apr 2007
Posts: 15
Re: How do you use your HELOC?

Based on your reply, I think we're talking about different frame of minds. I'm looking at it from a cash flow point of view, and how it'll increase over time to fund my retirement. If the underlaying securities drop 10%, it doesn't affect cash flow. It may be sad to some people, but it's pure psychological and can be corrected through education. If you're going invest $10k each year for the next 20 years to buy dividend paying stocks, having the stocks correct 10% means you can buy even more shares next time, and increase your cash flow.

__________________

__________________
www.FinancialJungle.com
Financial Jungle Guy is offline   Reply With Quote
Re: How do you use your HELOC?
Old 04-19-2007, 11:23 AM   #23
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,620
Re: How do you use your HELOC?

Quote:
Originally Posted by Financial Jungle Guy
It may be sad to some people, but it's pure psychological and can be corrected through education.
(*snork*) That's pretty funny!

I don't think an emotional preference can be corrected by quoting research, statistics, or data. Otherwise we'd all be at our ideal weights, live in harmony with the environment, be happily engaged in our avocations, and be invested in low-cost index funds with 0% turnover...

One reason that we've chosen to leverage our portfolio with a mortgage is because we're more afraid of losing to inflation than we are of losing our home. When enough factors line up in favor of one's emotional bias then it's easier to go ahead with the decision. When an emotional bias is still against the facts, though, it's almost impossible to change.
__________________
*
*

The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
Re: How do you use your HELOC?
Old 04-19-2007, 12:37 PM   #24
Dryer sheet wannabe
 
Join Date: Apr 2007
Posts: 15
Re: How do you use your HELOC?

I could not have said it better.

It's my fault for not being clear. I was referring to behaviour science, which has been documented extensively. The more we now how our brain works, the equipped we're in keeping our emotions in check.

It's my belief that investors make money with tough mentalities, not smarts.
__________________
www.FinancialJungle.com
Financial Jungle Guy is offline   Reply With Quote
Re: How do you use your HELOC?
Old 04-19-2007, 02:26 PM   #25
Full time employment: Posting here.
 
Join Date: Sep 2006
Posts: 678
Re: How do you use your HELOC?

My mortgage balance is currently about 36% of my home's market value, and I have a 15 year fixed at 5.25 which I am paying extra on each payment, and I expect to have it paid off in about 5-6 years. I am very opposed to having debt, and I am even more strongly opposed to having debt which is collateralized by my home. I.E., if I don't pay the debt, they can take my home. So for me, no HELOC of any kind, thank you very much.
__________________
JustCurious is offline   Reply With Quote
Re: How do you use your HELOC?
Old 04-19-2007, 03:16 PM   #26
Dryer sheet wannabe
 
Join Date: Apr 2007
Posts: 15
Re: How do you use your HELOC?

Quote:
Originally Posted by JustCurious
I am even more strongly opposed to having debt which is collateralized by my home. I.E., if I don't pay the debt, they can take my home.
If your home is not creditor proofed, they can take your home even if the debt isn't collateralized by your home. I think (correct me if I'm wrong) having the debt collateralized by your home simply means this particular lender is given the first dip at your home before other lenders.

Having said all that, leveraging is a very sensitive topic, and I can understand why people are resisting the idea. Investing with cash is never a bad option if people are uncomfortable with investment debts.
__________________
www.FinancialJungle.com
Financial Jungle Guy is offline   Reply With Quote
Re: How do you use your HELOC?
Old 04-19-2007, 06:36 PM   #27
Full time employment: Posting here.
 
Join Date: Sep 2006
Posts: 678
Re: How do you use your HELOC?

Quote:
Originally Posted by Financial Jungle Guy
If your home is not creditor proofed, they can take your home even if the debt isn't collateralized by your home. I think (correct me if I'm wrong) having the debt collateralized by your home simply means this particular lender is given the first dip at your home before other lenders.
I will correct you because you are wrong. It depends on which state your home is located, but in some states like mine (Florida) your home is protected from all creditors, with the obvious exception of those creditors who have a collateral interest in your property (ie a mortgage).
__________________
JustCurious is offline   Reply With Quote
Re: How do you use your HELOC?
Old 04-19-2007, 07:29 PM   #28
Dryer sheet wannabe
 
Join Date: Apr 2007
Posts: 15
Re: How do you use your HELOC?

Quote:
Originally Posted by JustCurious
It depends on which state your home is located, but in some states like mine (Florida) your home is protected from all creditors
Fair enough. I'm from Canada, that's why I hesitated.
__________________

__________________
www.FinancialJungle.com
Financial Jungle Guy is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
HELOC REWahoo FIRE and Money 19 09-05-2010 08:58 AM
Secured debt (HELOC) vs Unsecured debt (credit card) Sue J FIRE and Money 6 03-07-2007 11:02 PM
HELOC question laurence FIRE and Money 9 10-09-2005 10:39 AM
Credit-union HELOC offer, no closing costs Nords FIRE and Money 4 11-06-2004 07:15 AM
HELOC Interest Deductibility Question grumpy Other topics 2 10-25-2004 06:13 PM

 

 
All times are GMT -6. The time now is 04:29 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.