U.S. CitiesCity-Data Forum Index
Go Back   City-Data Forum > General Forums > Retirement
 [Register]
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
 
Old 04-27-2016, 06:15 AM
 
71,511 posts, read 71,674,131 times
Reputation: 49088

Advertisements

i disagree about helocs as a general statement for across the board and i think planning around one is not the greatest idea
a heloc still requires you to cough up the money to make the payments which in an emergency you may not have or be able to do . taking loans is not a replacement for your own funds . taking loans may just worsen an already bad situation .

today the banks now apply the same standards to helocs as they do to mortgages and you need income and a good credit score to qualify .

you don't need to own a place to live in retirement , the flip side of the equation is if your money wasn't tied up in ill-liquid real estate you might not have needed the loans .

general statements to complex situations are usually not the best advice .

Last edited by mathjak107; 04-27-2016 at 07:25 AM..
Reply With Quote Quick reply to this message

 
Old 04-27-2016, 07:12 AM
 
Location: Mount Airy, Maryland
10,459 posts, read 5,922,719 times
Reputation: 16151
Quote:
Originally Posted by M3 Mitch View Post
Not entirely - you can set up a CD to pay the interest to you monthly, or annually. You have locked up the principal, but the interest can be made available for spending.
I never knew this, obviously. Thanks that's good to know. Still not crazy about the returns on CDs but this is another option for sure.
Reply With Quote Quick reply to this message
 
Old 04-27-2016, 07:18 AM
 
1,696 posts, read 609,966 times
Reputation: 1773
I am not planning around heloc (ie, heloc would be strictly for a very unusual, totally unplanned situation), ie, my living expenses and sufficient extras are covered by annuities. But I do plan to live, and since I have to live somewhere, I might as well own the place in which I live, particularly if it gives me access to an emergent large lump of money (via heloc) for unplanned situations. True, if you don't have a credit score and resources to pay off that lump of money plus 1% interest per year over 30 years (ie, you don't have to cough up a lot of money, only about 4.3% of your total loan per year), then you cannot get heloc, but people who fully own their homes are also fairly likely to have a good credit score and sufficient sources of money to pay a tiny annual portion of an emergency loan. My scheme should work to most people who are above poverty level.
Reply With Quote Quick reply to this message
 
Old 04-27-2016, 07:23 AM
 
71,511 posts, read 71,674,131 times
Reputation: 49088
Quote:
Originally Posted by elnrgby View Post
What you are describing confirms what I said, that one needs to fully own a home (any kind of home, it could be a condo, even a rental condo) before retirement, so one qualifies for HELOC (home equity line of credit) in case of a major emergency. .
you may not be planning around the heloc but it is the general advice here i disagree with
Reply With Quote Quick reply to this message
 
Old 04-27-2016, 07:48 AM
 
1,696 posts, read 609,966 times
Reputation: 1773
What I am saying is that unplanned situations may indeed never happen, and it is better to secure myself against such situations by tying the emergency money (for an emergency which may never happen) in a home which I currently need anyway (since I need to live somewhere) and on which I can get a heloc (if, and only IF I should need it), than to keep a large lump of emergency money in liquid form in which this money currently does nothing for me. In other words, I don't know whether I will be hit by a car in the next year (more likely not since most people never get hit by a car), but I know with certainty that I need a home in the next year. So, what should I do - own a home (on which I can get a heloc for catastrophic medical expenses), or rent a home/mortgage a home and keep liquid money for the possibility that I might get hit by a car? I am doing the former, not the latter, and anybody can figure out for themselves whether this is generally advisable or not.
Reply With Quote Quick reply to this message
 
Old 04-27-2016, 10:11 AM
Status: "Re-edit status" (set 15 days ago)
 
Location: Was Midvalley Oregon; Now Eastside Seattle area
4,150 posts, read 1,890,030 times
Reputation: 3180
Quote:
Originally Posted by elnrgby View Post
What you are describing confirms what I said, that one needs to fully own a home (any kind of home, it could be a condo, even a rental condo) before retirement, so one qualifies for HELOC (home equity line of credit) in case of a major emergency. You say you could not finance a home purchase off ss+pension, then you bought a condo for cash (which condo you decided to rent), and now you easily qualify for HELOC. Exactly. But what qualifies you for HELOC is not additional rental income from the condo - it is the fact that you fully own all equity in at least one property (eg, a condo that you purchased for cash).

So my approach is to have annuities as ongoing income (with additional deferred annuities starting later, to have the ongoing income keep up with inflation) and have my home fully paid off so I can qualify for HELOC in case of unexpected extraordinary expense.
[Replier added the color]
THIS is important. Ability to show an Income stream, even though you really don't need the Income for living.

Our experience: We didn't have our deferred annuities turned on and unable to show Income other than SS and small pension.

When we approached the Bank for a Pre-approval to purchase a rental condo, they didn't really say No, We just qualified for a much higher interest than if we met all their criterii. We own our home and some land. We also had multiple 100k with this bank which we used to buy the condo outright. This was the proper move, the cash purchase made the purchase easy and fast. We offered early October, closed mid October and leased out by late Oct for a Nov 01 move in . DS did the necessary maintenance and appliance upgrades. Had we financed, we would be looking at leasing Dec 01 or later, which is not good.

Earlier in 2015, I wanted to get a handle on renting in Seattle. The complex, wanted a show of 3x Income of rental ask. I told them that we could come up with rent through the retirement holdings or cash Emerg funds. No go - We had to have Income.

YMMV
Reply With Quote Quick reply to this message
 
Old 04-27-2016, 11:12 AM
 
71,511 posts, read 71,674,131 times
Reputation: 49088
same here . we have a multi 7 figure portfolio but are both delaying social security . 3 banks told us they can't say for sure whether we would be approved for a co-op loan by the under writers . we would just pay cash but it is nice to have the option .
Reply With Quote Quick reply to this message
 
Old 04-27-2016, 12:31 PM
 
Location: NC Piedmont
3,911 posts, read 2,876,920 times
Reputation: 6291
I have the heloc as an emergency option but way down the list for anything but a home related expense because I still may need it for that. When the house needed a roof, I didn't diminish my equity by using the heloc; the value estimate wasn't legitimate because it needed a roof so my true equity is virtually the same. When it comes time to sell, I am going to walk through the house with a realtor and GC and take care of the things that would likely have lowered the sales price or increased time on the market. Again, I don't see that as liquidating equity but recognizing that there are credits and deficits that have to be reconciled to get the true equity. I would avoid diminishing equity by any means necessary; because it was a long term loan that has only had really good rates in recent years, I paid a lot of money for that equity. It is not on par with other money in my book. And while it may be your intent to pay it back and not cash it out, it becomes all too easy to let it ride.
Reply With Quote Quick reply to this message
 
Old 04-27-2016, 12:34 PM
 
1,696 posts, read 609,966 times
Reputation: 1773
[quote=leastprime;43852649][Replier added the color]
THIS is important. Ability to show an Income stream, even though you really don't need the Income for living.

I guess the discussion went in the direction of HELOC when somebody said that annuities were bad because by purchasing an annuity you lose access to your principal, which you might need in case of a large financial emergency (remodeling a kitchen was mentioned as an example of such an emergency, although I don't see how that would be an emergency unless your kitchen is hit by a tornado). I replied to that thought that one should fully own a home before getting annuities, so one could take out a HELOC (based on fully owning a home) if a tornado hits the kitchen and one unexpectedly needs a large lump sum. For any kind of loan, including a HELOC of course, you need to show enough income to repay the loan, but that does not invalidate the scheme of annuities for ongoing income + home ownership to pay for emergencies through heloc (you do need enough annuity income to be qualifiable for heloc, yes, but then you need enough annuity income anyway, if you are using annuities to support yourself in retirement). The point is still that one does not need to keep a lot of liquid money for emergencies if one owns a home and gets ongoing income from annuities.
Reply With Quote Quick reply to this message
 
Old 04-27-2016, 01:45 PM
 
Location: Ponte Vedra Beach FL
14,628 posts, read 17,923,045 times
Reputation: 6716
Quote:
THIS is important. Ability to show an Income stream, even though you really don't need the Income for living.

I guess the discussion went in the direction of HELOC when somebody said that annuities were bad because by purchasing an annuity you lose access to your principal, which you might need in case of a large financial emergency (remodeling a kitchen was mentioned as an example of such an emergency, although I don't see how that would be an emergency unless your kitchen is hit by a tornado). I replied to that thought that one should fully own a home before getting annuities, so one could take out a HELOC (based on fully owning a home) if a tornado hits the kitchen and one unexpectedly needs a large lump sum. For any kind of loan, including a HELOC of course, you need to show enough income to repay the loan, but that does not invalidate the scheme of annuities for ongoing income + home ownership to pay for emergencies through heloc (you do need enough annuity income to be qualifiable for heloc, yes, but then you need enough annuity income anyway, if you are using annuities to support yourself in retirement). The point is still that one does not need to keep a lot of liquid money for emergencies if one owns a home and gets ongoing income from annuities.
I was the one who mentioned a new kitchen. And no - it's not an emergency. Just like needing a new car isn't usually an emergency. Although getting a new HVAC unit if yours breaks down can be. Ditto when it comes to a new roof (or the tree work you need to remove the tree that fell on your roof!). People just have large expenses from time to time. Expected and unexpected. And - especially in the case of a real emergency - the last thing I'd want to have to do then is start messing around with a bank asking for a loan. So we keep 3 years of annual expenses on hand for these types of things. Robyn

Last edited by Robyn55; 04-27-2016 at 02:20 PM..
Reply With Quote Quick reply to this message
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.


Reply
Please update this thread with any new information or opinions. This open thread is still read by thousands of people, so we encourage all additional points of view.

Quick Reply
Message:

Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > General Forums > Retirement
Similar Threads
Follow City-Data.com founder on our Forum or

All times are GMT -6.

2005-2019, Advameg, Inc. · Please obey Forum Rules · Terms of Use and Privacy Policy · Bug Bounty

City-Data.com - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35 - Top