Boards opinion on Home Equity Loans

What about a HELOC but don't take it out and instead pay cash for the property using your savings. The HELOC becomes your new savings which you don't use unless necessary, and have it until you can build the actual savings back up. It could backfire if life events happen, but if you are looking to not pay interest on this new property, its an option.

The other question is do you really need this property?

quote:

---

The other question is do you really need this property?

---

^this is the main question.

You can’t take it with you and it sounds like you would enjoy it.

OTOH, would it deplete your savings completely?

If you want it, get it, but there may be hidden costs to keeping up another property.

Individuals will make different decisions based on what they value the most.

Would your kids partner with you to buy the place?

Do it, you wont regret it

quote:

---

Will this cause changes to your ability to save/invest? My main question would be will this stretch your budget too much. You could look into refinancing primary home to keep one payment and use equity to pay cash for the camp. This might not make sense depending on current mortgage rate. I would not go too long on term for a refinanced mortgage, but you could look at the numbers for a new 10 or 15 year mortgage.

---

No, I would still put the same into savings. We pay an additional $300 month on our current home mortgage. Will not be doing that any more. Even without paying the additional on current mortgage, house will be paid off in 4.5 years. Paying the additional $300 weeks would have had house paid off in 3 and we’re going to get a camp then but came across this place and it’s perfect for what we are wanting.

You sound like a good planner. Enjoy your camp. You will be fine regardless of the exact details on how you pay for it. I agree with your approach of not spending all your savings to pay for it. How much to finance and the other options are not clear cut, and somewhat dependant on future events that are not known.

I am surprised the rates you mention. I would have guessed a lower rate. Have you considered refinancing your primary mortgage? We don't know what rate you are getting to know if this is a reasonable option.

For your consideration:

Make sure the savings are earning $ for you and are secure / low risk (some in CDs or Money Market (MM)). I like MM. For example, our Vanguard MM is earning 4% today and is liquid (can access anytime). That’s $1200 pre tax for you annually.

Best is if you can save more cash to put towards camp.

The HE Loan rates sound high. If nothing lower…

Is ownership critical? Chasing lizards memories may not require HE loan?
Is leasing a camp outright an option? For example, lease for a year at comparable loan payment (or less). Seek option to continue past 1 year or exit. Might find better place, lower HE loan rates in future or circumstances change so option valuable?

If owning is only way, I would do the following. As HE loans are significantly higher than savings rate of return, would consider using $10k of savings (leaving you $20k or $800 earnings for you annually) and borrowing the $20k. May have missed, but existing mortgage holder provide HE loans at lower rate?

In my mind goes as follows, at 53yo and retirement on horizon, if there is any risk of not repaying HE loan (primary home foreclosure, albeit hopefully unlikely) and cost of a HE loan, I am thinking lease is less risky option to get same outcome and possible cheaper with term optionality yours. More financial control > HE loans cost and risk at this stage of life. Keeps savings compounding higher and longer.

I like your thinking (all those family things are awesome!). Those memories created will be more valuable than anything. Family focus is beautiful thing! Just don't pay such high borrowing costs.

Post pics of those lizards! Enjoy and good luck w/decision. You sound like a great Paw Paw!

Unless you routinely need to dip into those savings, or your work is volatile/unstable, why not just borrow $5-10k? Paying 8%+ just to let another $10-15k sit in savings would give me heartburn. Further, there are very few expenses that can’t be floated on a credit card for 30+ days to give you time to free up money from elsewhere if you’re in an emergency situation.

quote:

---

But both my kids and their spouses love to fish. And I’ve got 4 grandkids and so far 3 of them love to fish. My job is fairly stressful. The thought of having a place where I can get away on the weekends and sit by a fire pit and stare at the lake for two days sounds mighty nice. A place where I can go sit on my dock with a couple of my grandkids and some cane poles for an afternoon also sounds mighty nice. A place where I can sit on a swing next to my wife and watch the sunset into the lake sounds like heaven. A place where my grandkids can get off a tablet or from in front of a tv and chase lizards, catch fish, swim off the dock, go out on my son or son in laws boat and fish or get drug around on a tube. A place where I can grill up some burgers or steaks on the back porch with the Tigers playing on the TV.

---

Checks personal finances for lake cabin funding