The idiocy of the HELOC (Home Equity Line of Credit)
This article is going to infuriate quite a few people I know. I’m not a fan of the HELOC, or what some call the Home ATM. A HELOC, or the Home Equity Line Of Credit, allows you to take a loan out against the equity you’ve built in your home. HELOCs have been very popular even without equity built through paying down a loan, just due to the Federal-Reserve created inflationary pressures that have caused housing prices to rise — giving people more equity in a home than they actually earned by paying their mortgages. Of course, many of these equity values are now falling, leaving some people with mortgages and secondary loans (HELOCs) that are valued over the current value of the home.
First of all, I do believe the HELOC can be useful for a few things: investing in a new business, paying down high interest debt permanently, and emergencies (health or other). HELOCs are terrible ideas for those who want to use the money to buy a new car, take a vacation, or spend on frivolous and unnecessary consumer goods. Let’s look at why that is.
Read this entire article at the housing bubble site
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2 Responses to “The idiocy of the HELOC (Home Equity Line of Credit)”
Aaron Moncur Says:
December 14th, 2007 at 9:02 pm
HELOCs are fantastic tools, if you know how to use them. If you’re financially irresponsible, forget about it. You’ll just screw yourself over. You’ll take out $20k against your home, buy a boat that you can’t afford, and go into more debt. But if you’re financially savvy, and have some self control, you can actually MAKE money with your HELOC. Plus, there are several EASY ways to minimize your monthly HELOC payment. The point is, if you know a few clever techniques, you can get close to free money from the bank against your home.
Just don’t use it to buy a boat.
libertynow Says:
December 16th, 2007 at 11:02 pm
If someone is using a credit card they would pay a huge rate and it would not be tax deductible.
Also why let the bank sit on your equity and give your self no access to it. Now that is stupid! So if you miss a credit card payment and your credit score drops then you might have to sell your house if you want access to YOUR equity in liquid form.
Save it for Suzi Oreman
As long as you are not going to sell take as much as as you can at the best rate that will be a tax deduction.
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