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I do agree that everyone's situation is different. I don't agree on using feelings such as fear to make a decision. Each individual needs to instead look at the facts and then weigh the risks and benefits. Rather than use feelings, Firecalc can provide the details and indicate various outcomes including the worst case scenarios.
It's funny; I was planning on dumping some funds into the mortgage but I like seeing it in the bank.
Anyone feel equity rich (home paid off) but cash poor? Do you wish you had kept some aside?
It's kind of like when you have a car payment; somehow, you always make it. But, when you do not have that payment, do you save it? Generally, no.
If you did pay it off, did you tap into the equity later?
I like seeing mine in the bank as well.
I recently purchased a newer car and got a three year 0.99% car loan and normally I would have paid cash but why would I when I figure interest is $23/month and for that I can have an extra $30,000 cash in the bank should an emergency sneak up on us?
Same with the house... or condo. Here I am nearly 73 years old and still owe on a mortgage but we moved from a lower COL area to a higher COL area and purchased what we wanted.
We are now at the point we could pay off the mortgage but with interest at only 2.25% I don't see a reason why we would want to.
Don't get me wrong. You are okay doing it how you did but you have the underwritten resource should things go a bit sour. I gave my daughter $80k over the last 3 years in helping her buy her first home and for getting married. I am all for helping our children, especially daughters (LOL since I have only one child).
I do understand the workings of how it can be lucrative. I just don't like going into debt if I can help it. It is a personal preference. My wife and I worked out what our income was and how best to maximize what we had while speculating on one side and banking on the other we managed to get to retire at 60 for her and 58 for me and still manage to grow our wealth.
Good luck and best wishes as well.
Wedding...ahhhh. The day they moved into the house he proposed to her.
I have the one daughter too. I remember you started off at zero just like I did so you can get how important it is to want to be able to do something for our kids. It's a must have.
My husband has the mindset that the house should be paid for in retirement. I explained to him that if the income stayed up it really didn't matter. $950 isn't going to make or break us. I think the objection came from him thinking he wouldn't get to go as early as he wanted. He will. I on the other hand have always been the type to opt to work the extra hours. Early retirement isn't a goal of mine.
I recently purchased a newer car and got a three year 0.99% car loan and normally I would have paid cash but why would I when I figure interest is $23/month and for that I can have an extra $30,000 cash in the bank should an emergency sneak up on us?
Same with the house... or condo. Here I am nearly 73 years old and still owe on a mortgage but we moved from a lower COL area to a higher COL area and purchased what we wanted.
We are now at the point we could pay off the mortgage but with interest at only 2.25% I don't see a reason why we would want to.
Rather than borrow money to buy a car and borrow money to buy a house just so that you can have some money in the bank in case you need it, why not just pay cash for both the house and car and then, after the closing, take out a HELOC loan?
You could have hundreds of thousands of dollars available to you instantly with a HELOC loan without paying any interest until you actually use the loan. Otherwise, you're paying interest on the car and on the house even though you may never need the money that you stashed in the bank. With a HELOC loan, the money is available IF YOU NEED IT, but you pay no interest unless/until you actually withdraw it. Why pay interest for money that's on standby when you can have standby money available for free????
It's good to keep some money in the bank, say $15K to $25K to deal with emergencies or improvements like your hvac system needing to be replaced, your deck repaired, or replacing your bathroom vanities. But more than that really isn't needed in retirement. If you can pay off all your debt including your mortgage you are doing yourself a favor. Since we've been retired for the past 12 years we are debt free. No mortgage, no loans, no credit cards, no paying anyone interest, no worry about credit scores. Tapping into the home equity would defeat the purpose of paying it off in the first place. It's a good feeling of financial security to be debt free and having a retirement income greater than our expenses to slowly build up those savings accounts, even though they may never be used except as inheritances to our children.
Quote:
Originally Posted by Bette
It's funny; I was planning on dumping some funds into the mortgage but I like seeing it in the bank.
Anyone feel equity rich (home paid off) but cash poor? Do you wish you had kept some aside?
It's kind of like when you have a car payment; somehow, you always make it. But, when you do not have that payment, do you save it? Generally, no.
If you did pay it off, did you tap into the equity later?
Rather than borrow money to buy a car and borrow money to buy a house just so that you can have some money in the bank in case you need it, why not just pay cash for both the house and car and then, after the closing, take out a HELOC loan?
You could have hundreds of thousands of dollars available to you instantly with a HELOC loan without paying any interest until you actually use the loan. Otherwise, you're paying interest on the car and on the house even though you may never need the money that you stashed in the bank. With a HELOC loan, the money is available IF YOU NEED IT, but you pay no interest unless/until you actually withdraw it. Why pay interest for money that's on standby when you can have standby money available for free????
Remember 2008 ? Helocs were closed all over the place or denied as values dropped and banks closed credit lines . The banks didn’t even have money to loan .
Plus today you need the same criteria for a heloc as a mortgage . No income because you lost your job can be an issue ..
Helocs are more expensive as well …. I would never recommend anyone count on a heloc as emergency money or money for tough times…
Last edited by mathjak107; 06-20-2021 at 02:50 PM..
Rather than borrow money to buy a car and borrow money to buy a house just so that you can have some money in the bank in case you need it, why not just pay cash for both the house and car and then, after the closing, take out a HELOC loan?
You could have hundreds of thousands of dollars available to you instantly with a HELOC loan without paying any interest until you actually use the loan. Otherwise, you're paying interest on the car and on the house even though you may never need the money that you stashed in the bank. With a HELOC loan, the money is available IF YOU NEED IT, but you pay no interest unless/until you actually withdraw it. Why pay interest for money that's on standby when you can have standby money available for free????
When the interest rates go up, rates on HELOC's will as well.
They work like a credit card.
Some banks require a HELOC to be in the 2nd position but not all.
There are hybrids that can remain fixed but there are lots of details and clauses …helocs are fine for certain uses but as a replacement for your own war chest , I say never
My sister and bil had a heloc. When he died, the bank demanded repayment. She did not have the money. It was a major issue while she also had to deal with a sudden, unexpected death and all sorts of other issues.
When the interest rates go up, rates on HELOC's will as well.
They work like a credit card.
Some banks require a HELOC to be in the 2nd position but not all.
What bank would rather have a second mortgage position for X dollars rather than a FIRST mortgage position for X dollars? That doesn't make any sense, IMO.
And, as I explained, having a HELOC approved and ready for use in case of emergency doesn't mean that you have to use it. Nor does it mean you pay any interest if you don't use it. It's like having money in the bank that's available for your use when you need it. The idea is to have the money available for your use without paying ANY interest, not paying interest on money that you don't need.
What good does it do to pay interest on mortgage loans and car loans just so you can say "Whoopee, I've got X dollars in my savings account"? Keep in mind that the X dollars that you put into your savings account was BORROWED money that you're paying interest on whether you need the money or not.
Last edited by Chas863; 06-20-2021 at 08:26 PM..
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Heloc
