Home

[Trudey]

Would it be a smart idea to get a home equity line of credit (HELOC) prior to paying off my mortgage? I am only considering it for use on major repairs, unexpected costs on the house, etc. Hopefully, I won't need it...but just in case? What do you think?

[Beauty Maven]

Don't do it. Your house is not a bank. Too tempting to use the $$ for other unimportant things. Take the time to build up an emergency fund some other way. House values are not as stable as everyone thinks (recent history proves this), and you could be underwater overnight. Don't do it.

[NickNack]

I agree with Beauty Maven.

[VaBelle35]

There is a recent thread on this that you might want to check out with lots of good info.

For me, I took out a HELOC on my home in 2009 when the market crashed because I wanted to make sure I had the line of credit while I still had a job. Your equity does you no good if you can't access it.

Luckily I've never needed it and over the years the bank has lowered and then raised the amount, but I feel good knowing it's there in an emergency for a big ticket item like a room or HVAC system.

[esmeraldagooch]

If you attach a HELOC to the home and can't pay if off you loose the house. If you can't pay off a CC or regular loan you can file bankrupsy.

[PinkyPetunia]

You may incur closing costs if you take out a HELOC. Does it make sense to pay out money just to have a line of credit available? Only you can say. If you don't have much set aside for emergency expenses, the HELOC may make sense for you.

If you plan on selling your house you need to prove your HELOC is paid off and closed.

[Southernfriedchick]

Honestly, I would think long and hard about doing this. Don't do it.

[Trudey]

Thanks for your input. Definitely not doing it.

[stevieb]

If you're really good about not using it unless absolutely needed, it might be worthwhile, but chances are there will be up-front costs involved. Of course, if you don't use the credit there are no payments and no interest... I've known folks who have used a LOC to pay off other debt, which can be smart, since the interest rates are less than credit cards, but again, it only makes sense if you then don't run up added debt. If you think your credit is good, you might just opt for a home improvement loan when and if you decide you need one.

[ID2]

We took out a HELOC back when we bought this house 18 years ago. It has been great for us. We were able to use it periodically throughout the years when we wanted a major purchase or to help us over a rough spot. But we are very disciplined when it comes to our finances. First and foremost we pay off our debts ASAP. If you have discipline with how and when you spend your money then a line of credit may be smart for you. Otherwise abandon ship.