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Old 03-03-2017, 11:47 AM
 
3,460 posts, read 2,196,450 times
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Quote:
Originally Posted by lovnova View Post
Would it be a good idea to get a equity line of credit prior to retirement. That is while still working? Seems like it would be easier (for most people) to secure a ELOC while still in the work force.

Don't really plan to use it in retirement, but just in case of emergency etc...

We had a ELOC years ago. Used it for some home improvements. I can't remember if it had a time limit or if it ended when we sold the property it was secured against. I think it was the latter.

Anyone ever do this as a retirement strategy?

Thanks!
Yes, a HELOC is a good idea.

A HELOC typically has a 10-year withdrawal period. So if you are just going into retirement, get this HELOC or refinance the one you have to extend this withdrawal period. Get a HELOC which has no cost to set-up or refinance. You don't even need to keep a balance on them. The banks don't care if you have one during retirement or that you will retire, because they have your home as collateral.

It is always best to get the HELOC while you are employed and finances are in good order to get the best interest rate and loan amount.

HELOCs are tired to the property. So if you sell the property the HELOC balance must be paid off (people do this from the proceeds of the sale of the property) and the HELOC goes away. You can get another HELOC with the new property.

A HELOC is a smart thing to have, because in the case of an emergency you can write a check for a new roof, new AC, or new heating system without having to disrupt your retirement investments. Just like the interest on a regular mortgage, the HELOC interest is tax deductible.
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Old 03-03-2017, 12:29 PM
 
Location: Albuquerque NM
1,656 posts, read 1,521,661 times
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I'm looking into getting a HELOC before I retire to use for potential house repairs. Once I retire, I'll be making some house repairs and possible updating a bathroom prior to putting my home on the market. Although I have saved some cash for this, my concern is unexpected issues in an older home. The HELOC will be my safety net. I agree with others that even if you have no current plans for the money, a HELOC is a good thing to acquire prior to retirement.
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Old 03-04-2017, 07:01 AM
 
1,434 posts, read 720,135 times
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Quote:
Originally Posted by mathjak107 View Post
new rules went in to effect where you have to meet the same criteria for an equity loan as a mortgage . that means having the proper income .
I realize that the new rules are a good thing since the previous loose lending and giving loans to just about anyone who needed them (regardless of their ability to pay back) led to the banking/market crash but.....any idea how pension income (in my case a defined gov't pension) is regarded?? I assume that it could be considered a "proper" income stream but who knows? I'm not in need of a HELOC at this time but was just wondering if my situation or those in similar ones would result in approval.
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Old 03-04-2017, 08:13 AM
 
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pension ,annuity and social security are all acceptable income forms . any income stream not under your control is fine .

we are retired and may decide to buy something next year . i am delaying ss and have multiple 7 figures in assets . 3 banks said it is a toss up as to whether their under writers would approve us without showing proper income sources .

most buyers of mortgages will not buy the loans unless they meet the income criteria . you need a bank that does asset based lending and so far i have not found one locally .

they basically cut your assets in half , divide by the number of payments and use that as an income base .
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Old 03-04-2017, 09:09 AM
 
Location: SoCal
13,200 posts, read 6,308,074 times
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I got my HELOC before I retired. I thought it might be harder when I didn't not have a job. The HELOC line is only for 10 years, I think. Maybe by then I can renew it.
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Old 05-09-2017, 11:48 AM
 
Location: West Central Ohio
420 posts, read 234,092 times
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My husband and I got a HELOC in 2004 when we thought we were going to have to use it for a major repair project on our house. We didn't end up having to use it for that but when my husband lost his job in 2010 and just decided to go ahead and retire it was a major blessing to extend our money to get by till he could draw on his IRA. Because of our limited income we have only been paying the minimum on this for about 5 years. I know it isn't the best but it is what we had to do. My husband is going to get an inheritance this summer that we have decided to use to pay off the mortgage, a credit card we took out to get the roof fixed and to put a big lump sum on the HELOC. I was noticing that in 5 years that the balance hasn't gone down and all the interest we have paid has of course done nothing to lower the balance. Now that we no longer will have any major bills outside of the regular normal bills we are thinking of transferring the balance on this to a zero percent credit card so that all the payments go to pay off this debt quicker, instead of giving the bank all this money. We paid over $800 last year in interest and $368 already this year. Our credit score is 820 and hopefully I will be be able to find a credit card with a zero percent for as long of a term I can find. Then I will transfer it again once it runs out. I know that there are people who think this is a crazy way of getting out of debt but it works for us.

Can't wait till we get this money as I feel in limbo. Our HELOC was for 21 years and matures in 2025
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Old 05-09-2017, 03:15 PM
 
29,772 posts, read 34,851,819 times
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Quote:
Originally Posted by mathjak107 View Post
pension ,annuity and social security are all acceptable income forms . any income stream not under your control is fine .

we are retired and may decide to buy something next year . i am delaying ss and have multiple 7 figures in assets . 3 banks said it is a toss up as to whether their under writers would approve us without showing proper income sources .

most buyers of mortgages will not buy the loans unless they meet the income criteria . you need a bank that does asset based lending and so far i have not found one locally .

they basically cut your assets in half , divide by the number of payments and use that as an income base .
Yup and CCRC's can be like that also. Fixed income is king in retirement.
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Old 05-09-2017, 03:21 PM
 
Location: Florida
4,358 posts, read 3,692,049 times
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Yes, rules will want you to demonstrate income sufficient to justify the loan and this can be hard if you are not working.
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