ERetire
Confused about dryer sheets
Now I'm confused....how does this work and how is it calculated. Is this during the draw down period or the loan repayment period?
I opened one a few months ago. I agree you should do it, but with a caveat. I would not charge anything that you could not pay off in a short time, such as a year. Why? interest rate is floating...and can rise rapidly. Many comments have used the words "low interest" loan...but it may end up not being "low" in a year or two.Thanks for everyone's post.
It looks like a overwhelming yes....now I will have to investigate the details and do the shopping. What are the costs, do they cancel the line in a certain amount of time if not used, if you cancel the HELOC do they charge, do you do business with your local bank or go online? etc.
Interesting that a couple of folks referenced PENFED. Why?
Thanks again!
It's during the loan repayment period. If you borrow $100k, and your HELOC has the 2% clause...you'd have to pay a minimum of $2k the first month.Now I'm confused....how does this work and how is it calculated. Is this during the draw down period or the loan repayment period?
I opened one a few months ago. I agree you should do it, but with a caveat. I would not charge anything that you could not pay off in a short time, such as a year. Why? interest rate is floating...and can rise rapidly. Many comments have used the words "low interest" loan...but it may end up not being "low" in a year or two.
To you it may be sacred, to someone else it's just dead equity.My home ownership is sacred to me. A HELOC puts a lien on my home. Why would I put up a $400,000 collateral for a loan of as little as a few dollars? Too many times "chit happens" with paperwork to risk saving a few bucks on a short term interest rate....
Nords said:To you it may be sacred, to someone else it's just dead equity.
To be punctiliously correct, you're not risking $400K of collateral unless you have a $400K HELOC and write a $400K check on it. You're only giving them a lien at the country record for the HELOC, and there's only collateral at risk if you draw on it.
In other words, except for the lien part, it's like a credit card. You only take on as much debt as you're willing to handle. Except this particular emergency fund has a much lower interest rate.
Your reasons for not having a HELOC are different from someone else's reasons for getting a HELOC. They're just different reasons, and neither reason is "better" than the other.
Sounds like a lot of trouble. What is your experience?...i would recommend looking to lien all properties even just with a separate company that you own that is not the company that owns the property. If you are going to doit, do it right make regular payment , have a note, file taxes ect. From my experience it is worth it.
REWahoo said:Sounds like a lot of trouble. What is your experience?
I have to agree. A free and clear property puts a target on your back for unscrupulous attorneys and fortune seekers at your loss, i would recommend looking to lien all properties even just with a separate company that you own that is not the company that owns the property. If you are going to doit, do it right make regular payment , have a note, file taxes ect. From my experience it is worth it.
The interest rate uncertainty risk is one reason I like the Penfed 5/5 ARM HELOC. You know what you are paying for 5 years, and what the maximum you will be paying in subsequent five year periods so you can plan and act accordingly. But in general I agree - incurring a lot of debt on a variable rate loan that can change monthly or quarterly could leave you paying a lot of interest if rates shoot up rapidly.
Nords said:Any of you attorneys on the board care to weigh in on the ability to pierce a trust set up for these purposes?
Come on attorneys.. I would love to hear your thoughts. I currently have a loan on my home but this year it will be gone. I am not sure what tondo to protect my home once it paid off. Lots of ideas but have not made a choice yet.
skipro3 said:If you haven't already, you should really meet with an estate planning attorney. He should be able to set you up with a family trust, durable power of attorney for medical, durable power of attorney for financial, a living will and a final will. Cost is usually around $1500 to $2000 and they handle all the paper work.
Having all your assets protected by placing them in a trust is a pretty good thing to do. Remember O.J. Simpson? He lost the civil suit against him for the wrongful death of his ex-wife. The judgement was for millions of dollars. But old O.J., he's out there on the golf course, living life large and the victims can't collect. Why? Because he has his assets in a trust fund. A civil suit is for only personal assets. A trust is not a personal asset. Hence, they can't be touched by anyone until the money is pulled out and put into a personal bank account.
Not so far, but several HELOC lenders froze or even reduced the limits on HELOCs during the credit crunch. I think the HELOCs were frozen because the lenders were running out of liquidity, not the homeowners.So this HELOC sounds perfect, except someone cautioned in another thread that some people have trouble drawing their money when they need it. (http://www.early-retirement.org/forums/f28/cash-bridge-to-er-60061.html) Has this been a problem with PenFed? The comments here all seem positive.
Thanks!Thank you, Nords. I don't know how PenFed would view our post-DH-retirement cash flow, since it's less than our current income but still reasonably good. I guess we'll have to live with the HELOC freeze risk, although it sounds like it might more likely with banks vs. CUs. If only I could reduce all my risks and predict the future, then I could really sleep at night.
BTW, I have enjoyed reading your posts here over the past five or so years. If it wasn't for all the discussions about carrying a mortgage into retirement, I probably wouldn't feel as comfortable with the idea as I do (although ours is 10 years, not 30). Now I view it as a cash flow management tool more than a weight around my neck, or something equally daunting.
I think a conservative assessment of the risk would be "once every 20-30 years." But I'd never heard of it happening before.