Hi, Im Todd and I'm looking to retire early. I am concerned about financial emergencies that I haven't planned for. One example would be unforseen medical problems, but I'm sure there are hundred of others. My current personal dillema is as follows:
There seems to be a consensus view that (HELOC-S), that is Home Equity Lines of Credit are the great emergency product for a retiree in a financial crunch and I happen to disagree. I believe that a Personal Unsecured Line of Credit at a reasonable interest rate (maybe 2-5 points above prime) is a much safer deal for a retired person. I would not want to be in a position where my shelter was on the line when I retire if I do not have the money to meet a monthly loan payment. The lenders promote the correct tax advantages for HELOCs and the interest rate is cheaper, but would you not sleep better at night when you are retired knowing that your shelter was not on the hook for missing a payment? I would sleep better and maybe that's all that counts! BTW, I am not promoting default, maybe a borrower like myself, if I got into a cash crunch, could work out an arrangement on an Unsecured Personal Line of Credit to make the payments lower, but if I sign away my home as collateral, I'm afraid that I'd have no bargaining power with the lender. Some unscrupulous lender types would rather get my home at an auction price than have any interest in renegotiating better terms or an easier payment of my HELOC. I may just be paraniod, but I would not want to end up retired without shelter.
I'm thinking of applying for the Personal Unsecured Line of Credit and obtaining it while I'm still working so that the lenders will give me higher credit limits (becuase of my current working income as opposed to retirement passive income). I would only use the credit in case of an emergency as I do not want any extra debt. What are others thoughts on this subject, or am I just way out there in loony bird territory? Maybe just too much time on my hands?
I am second guessing myself (only becuase of the lower interest rates for Home Equity Line) but it's only a few points difference. So I would like others input. Please reply as I am currently weighing my options and this is a almost a split decesion, but I am obviously leaning towards Unsecured Personal Line of Credit, but I haven't applied for them yet. What would you do?
There seems to be a consensus view that (HELOC-S), that is Home Equity Lines of Credit are the great emergency product for a retiree in a financial crunch and I happen to disagree. I believe that a Personal Unsecured Line of Credit at a reasonable interest rate (maybe 2-5 points above prime) is a much safer deal for a retired person. I would not want to be in a position where my shelter was on the line when I retire if I do not have the money to meet a monthly loan payment. The lenders promote the correct tax advantages for HELOCs and the interest rate is cheaper, but would you not sleep better at night when you are retired knowing that your shelter was not on the hook for missing a payment? I would sleep better and maybe that's all that counts! BTW, I am not promoting default, maybe a borrower like myself, if I got into a cash crunch, could work out an arrangement on an Unsecured Personal Line of Credit to make the payments lower, but if I sign away my home as collateral, I'm afraid that I'd have no bargaining power with the lender. Some unscrupulous lender types would rather get my home at an auction price than have any interest in renegotiating better terms or an easier payment of my HELOC. I may just be paraniod, but I would not want to end up retired without shelter.
I'm thinking of applying for the Personal Unsecured Line of Credit and obtaining it while I'm still working so that the lenders will give me higher credit limits (becuase of my current working income as opposed to retirement passive income). I would only use the credit in case of an emergency as I do not want any extra debt. What are others thoughts on this subject, or am I just way out there in loony bird territory? Maybe just too much time on my hands?
I am second guessing myself (only becuase of the lower interest rates for Home Equity Line) but it's only a few points difference. So I would like others input. Please reply as I am currently weighing my options and this is a almost a split decesion, but I am obviously leaning towards Unsecured Personal Line of Credit, but I haven't applied for them yet. What would you do?