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Started By
Message
HELOC
Posted on 7/22/17 at 2:44 pm
Posted on 7/22/17 at 2:44 pm
Hey MB experts...
Is it worth having a HELOC on the side in case you ever need it? I do most of my banking with Chase, and there is a $50 origination fee and a $50 yearly fee. Not horrible, but obviously I would only want to get it if I might use it.
Here is my specific situation... my wife and I have enough yearly income to cover our expenses, but because of my work structure, about 75% of my income comes in the second half of the year (based on the timing of 4 "quarterly" bonuses), and probably 2/3 of my yearly expenses come in the first half of the year. This year, we got destroyed by this issue because of poor planning and a huge tax burden.
I have a cool boss who ended up paying me early for July services because the situation got so bad, and it kind of saved me.
A friend of mine told me I should have just used a HELOC to cover my expenses and then just paid it down right after I got my bonus. This sounds like a great idea to me, except I was under the impression that a HELOC was mostly for house improvement stuff. Can you use it for whatever you want? And after you pay it off, do you have to re-apply to use it again? (e.g lets say I get $25,000, use $10,000, then pay it off 2 months later. If I need to use it again, is the account just open to use when I need it?)
And would you use your current bank for convenience if you were doing just short term loans to yourself (how I would be doing this), or is it not overly burdensome to have multiple banking institutions?
Is it worth having a HELOC on the side in case you ever need it? I do most of my banking with Chase, and there is a $50 origination fee and a $50 yearly fee. Not horrible, but obviously I would only want to get it if I might use it.
Here is my specific situation... my wife and I have enough yearly income to cover our expenses, but because of my work structure, about 75% of my income comes in the second half of the year (based on the timing of 4 "quarterly" bonuses), and probably 2/3 of my yearly expenses come in the first half of the year. This year, we got destroyed by this issue because of poor planning and a huge tax burden.
I have a cool boss who ended up paying me early for July services because the situation got so bad, and it kind of saved me.
A friend of mine told me I should have just used a HELOC to cover my expenses and then just paid it down right after I got my bonus. This sounds like a great idea to me, except I was under the impression that a HELOC was mostly for house improvement stuff. Can you use it for whatever you want? And after you pay it off, do you have to re-apply to use it again? (e.g lets say I get $25,000, use $10,000, then pay it off 2 months later. If I need to use it again, is the account just open to use when I need it?)
And would you use your current bank for convenience if you were doing just short term loans to yourself (how I would be doing this), or is it not overly burdensome to have multiple banking institutions?
This post was edited on 7/22/17 at 2:48 pm
5
Posted on 7/22/17 at 5:50 pm to AndyJ
A HELOC is great. I have had one for years.
Basically it is a revolving credit line, usually with some minimum withdrawal like $4000. Like a credit card, you only pay principal and interest if you have an outstanding balance that month. Once you pay it off, the credit line remains, but you don't have to make payments. This differentiates it from a Home Equity Loan, which is a set amount that you borrow up front.
As far as I know, you can spend HELOC funds on anything. And, the interest that you pay is tax-deductible subject to certain provisions (especially in AMT). Over the years I have had one as an emergency fund but have also used it to float a couple of big purchases and short-term investments.
A HELOC is great peace of mind and convenience if you have equity in your home. Unless you or your spouse would spend up to the limit (like maxing out a credit card), I can't think of a reason not to get one if you have equity in your home. Generally for determining equity, they use 80% of you home value and subtract debt, but this may vary by state.
Also, no reason to get one at your existing bank just because. Shop around for rates. Online transfers to your current checking account are pretty easy even from a different bank. Currently I have an interest-only HELOC through Unify FCU, which means on any balance I would only have to pay interest each month (not principal). Again, this is beneficial as an emergency fund. How else would I have access to my home equity in an emergency or job loss? That would be a bad time to apply for a HELOC or Home Equity Loan.
Basically it is a revolving credit line, usually with some minimum withdrawal like $4000. Like a credit card, you only pay principal and interest if you have an outstanding balance that month. Once you pay it off, the credit line remains, but you don't have to make payments. This differentiates it from a Home Equity Loan, which is a set amount that you borrow up front.
As far as I know, you can spend HELOC funds on anything. And, the interest that you pay is tax-deductible subject to certain provisions (especially in AMT). Over the years I have had one as an emergency fund but have also used it to float a couple of big purchases and short-term investments.
A HELOC is great peace of mind and convenience if you have equity in your home. Unless you or your spouse would spend up to the limit (like maxing out a credit card), I can't think of a reason not to get one if you have equity in your home. Generally for determining equity, they use 80% of you home value and subtract debt, but this may vary by state.
Also, no reason to get one at your existing bank just because. Shop around for rates. Online transfers to your current checking account are pretty easy even from a different bank. Currently I have an interest-only HELOC through Unify FCU, which means on any balance I would only have to pay interest each month (not principal). Again, this is beneficial as an emergency fund. How else would I have access to my home equity in an emergency or job loss? That would be a bad time to apply for a HELOC or Home Equity Loan.
Posted on 7/22/17 at 7:30 pm to Bayou Tiger
Thanks so much for taking the time to explain all of that!
Posted on 7/22/17 at 8:01 pm to AndyJ
It's one of the perks of home ownership. You can spend it on anything. Just make sure you make your minimum payments or you lose your house. The interest you pay is also tax deductible up to a point. I love mine and use it for quick access to $$$.
Posted on 7/23/17 at 8:25 am to AndyJ
It only takes a couple of weeks to get a Heloc, basically need an appraisal and then it's done usually like 3 weeks in my experience. I don't know if it's worth having open and paying fees on just for that.
Given that, I would potentially talk with a CPA if you haven't already about your income situation. See if they have any tips. The $150-200 for a meeting may save you 10 times that.
Also, I don't think a HELOC is worth doing in your situation imo. It's very very risky to pay bills on credit, if you are laid off or otherwise unable to work then what? Id work on your income situation and savings. Make it an absolute priority to get that situated before opening a Heloc.
Given that, I would potentially talk with a CPA if you haven't already about your income situation. See if they have any tips. The $150-200 for a meeting may save you 10 times that.
Also, I don't think a HELOC is worth doing in your situation imo. It's very very risky to pay bills on credit, if you are laid off or otherwise unable to work then what? Id work on your income situation and savings. Make it an absolute priority to get that situated before opening a Heloc.
Posted on 7/23/17 at 10:02 am to AndyJ
For $1k a HELOC is the smartest thing anyone with equity in their home can do IMO.
Posted on 7/24/17 at 7:45 am to AndyJ
In addition to what BayouTiger said, I'd shop around for a HELOC with no annual fee if you don't need to draw on it anytime soon. I have one at Penfed.
Posted on 7/24/17 at 9:44 am to foshizzle
looked at my bank, current fees and rate:
Home Equity Line of Credit $199 Processing Fee Up to 90% 4.50%
Home Equity Line of Credit $199 Processing Fee Up to 90% 4.50%
Posted on 7/24/17 at 9:07 pm to tigeraddict
quote:
Home Equity Line of Credit $199 Processing Fee Up to 90% 4.50%
How will they determine what 90% of value is without appraisal and who is doing free appraisals for your lending institution?
This post was edited on 7/24/17 at 9:09 pm
Posted on 8/1/17 at 11:12 am to ItNeverRains
To add....
We don't need the money right now, but we might want to use it in the next year or so to purchase investment property. I think property values in our area will recede a bit in the next year or so, and I'm pretty sure interest rates are headed up...
So should I get one now to take advantage of where our principle value is relative to our current value, even if we don't plan on using it right away?
We don't need the money right now, but we might want to use it in the next year or so to purchase investment property. I think property values in our area will recede a bit in the next year or so, and I'm pretty sure interest rates are headed up...
So should I get one now to take advantage of where our principle value is relative to our current value, even if we don't plan on using it right away?
Posted on 8/1/17 at 1:20 pm to AUjim
anchored?
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