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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.
Sorry, as a mortgage broker, I've seen too many people get in trouble with HELOC's - fixed and interest only products.
They do not mean to but things come up. I have seen it happen in all walks of life too.
When COVID-19 hit in March 2020, most institutions suspended lending on HELOC's. TD Bank was one of the few that did not.
You are correct about the 2nd position but some firms have these policies.
The mere fact the helocs take the same income and credit score as mortgages do says this is not a good idea counting on s credit line for money when needed.
More often then not you are hitting that credit line for a particular reason like tough financial times.
Getting equity back out of a house is expensive and not always easy or possible ….even a reverse mortgage is an overly expensive loan
The mere fact the helocs take the same income and credit score as mortgages do says this is not a good idea counting on s credit line for money when needed.
More often then not you are hitting that credit line for a particular reason like tough financial times.
Getting equity back out of a house is expensive and not always easy or possible ….even a reverse mortgage is an overly expensive loan
I think that you and Bette (above) are judging everyone by the habits of those who can't manage their money. HELOC's are very good financing instruments for those people who are good money managers. If a person is a poor money manager, they'll find a way to screw up regardless what you do to protect them.
In fact, I would contend that HELOC's are safer than the FHA and other loans that require only a very small down payment. At least with HELOC's, the lender won't go higher than 65% LTV ratio, while many first mortgage loans will go to 95% LTV ratio or maybe even higher. So ask yourself this question, "Which is safer, a 65% LTV loan or a 95+% LTV loan?" The answer is obvious... well, at least to most people.
Meh , I will never recommend people use a heloc as a war chest instead of their own money ..hey , you want to do it ,fine .
But I think recommending others do this is not a good recommendation at all
So, instead, you recommend that they borrow money on their house and car and pay interest (as the OP inquired about) just so they could have some money in a savings account?????? Bad idea to pay interest on borrowed money when a person doesn't even have a need/use for the borrowed money. But I guess we've already plowed this ground, so I'll just say we agree to disagree.
So, instead, you recommend that they borrow money on their house and car and pay interest (as the OP inquired about) just so they could have some money in a savings account?????? Bad idea to pay interest on borrowed money when a person doesn't even have a need/use for the borrowed money. But I guess we've already plowed this ground, so I'll just say we agree to disagree.
You my friend don’t read my posts …I have stated endlessly I wouldn’t take a mortgage if I was not going to have a high risk to reward premium ….I have said over and over , in retirement if I was not going to be a very high level of equities there is not enough risk premium to put it in a balanced portfolio.
This still has nothing to do with having a decent war chest on hand with some of that money so you don’t have to count on a heloc.
How much cash we choose to keep is a different issue when the bulk of the money is invested as well as why we have that cash.
Holding cash at times can be like owning an option to buy investments at lower prices but with No expiration date .
So a high level of cash temporarily is not the same thing as cash being your investment.
I likely have 7 figures in cash awaiting investment at some point ..but for now I have multiple 7 figures that are invested so holding cash for better opportunities is not a problem ….
We sold our real estate Llc and are looking at a lot of different options we have for the money
Location: Stuck on the East Coast, hoping to head West
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Quote:
Originally Posted by Chas863
Re: Bolded part. It's true that if a person has the choice, using your money to invest in equities rather than in your house will pay a better return in the long run. However, "in the long run" we're all going to be dead. For some people, that will happen sooner than others.
To compound that situation, most people don't even have the choice of paying all cash for their house until they are about 50 to 60 years old, and it's these precise people who may not have numerous decades to invest their money "for the long run". Some may have just a decade or two (if that) and if they chose the "investment" route and the market tanks shortly after they do the bulk of their investing, then their retirement years may not be their golden years. They could turn into their "penny pinching" years.
My basic money strategy is to categorize my money/assets/pensions/etc into three different categories: The first category is the "basics or necessities". That would include my primary residence and funds sufficient to live decently for the remainder of my life. I'm not going to gamble or risk these assets because it would be too difficult to get back if I had to start over again from scratch.
The second category is the "niceties". This category pays for things that are nice to have and do, but are not considered as necessities. I'll risk these funds, but do so somewhat conservatively.
The third category is my "play money". And although it's quite sizeable right now, I could lose every penny of it and still not affect my lifestyle in any meaningful way.
So, my advice to someone at or near retirement age is to take care of the necessities first. Don't put your house in hock just to have funds to gamble in the market. Take care of the basics and have sufficient extra for some niceties. Then, funds over and above that, invest for growth.
You my friend don’t read my posts …I have stated endlessly I wouldn’t take a mortgage if I was not going to have a high risk to reward premium ….I have said over and over , in retirement if I was not going to be a very high level of equities there is not enough risk premium to put it in a balanced portfolio.
This still has nothing to do with having a decent war chest on hand with some of that money so you don’t have to count on a heloc.
How much cash we choose to keep is a different issue when the bulk of the money is invested as well as why we have that cash.
Holding cash at times can be like owning an option to buy investments at lower prices but with No expiration date .
So a high level of cash temporarily is not the same thing as cash being your investment.
I likely have 7 figures in cash awaiting investment at some point ..but for now I have multiple 7 figures that are invested so holding cash for better opportunities is not a problem ….
We sold our real estate Llc and are looking at a lot of different options we have for the money
Well, pardon me, but I've got other things to do besides just trying to remember everything you've ever written. That would be one hell of a task, even for me.
But the thing is, this thread isn't about what YOU would do. Nor is it about what "I" would do. Instead (for about the 10th time), it's about the OP and people in a similar situation. I think that everyone who cares to hear your opinion of it and my opinion of it have already heard all they care to hear about the subject from either of us.
Soooo, unless this thread takes some wildly different twist, I'll just bow out of it. Now it's all urine... uh, I mean "yours".
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