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Old 03-03-2017, 05:42 AM
 
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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!
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Old 03-03-2017, 06:03 AM
 
Location: Colorado Springs
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If you plan to borrow, it would be a good idea.

Just make sure that the terms and conditions don't cancel the HELOC upon retirement.

Those tricky Banksters have a way of anticipating what their customers will do.
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Old 03-03-2017, 06:06 AM
 
Location: The Triad (NC)
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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.
We had a HELOC years ago. Used it for some home improvements.
This implies that you have a home with equity. Good for you.

Quote:
That is while still working? ... Seems like it would be easier...
Yes, of course. The Q is what you might need/use the money for.

Going deeper:
Do you intend to remain there for the duration?
Does the layout/size/location suit?
Is the house in good enough condition to last for the duration as is?
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Old 03-03-2017, 06:51 AM
 
Location: RVA
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And of course knowing for sure that if the HELOC is used, that paying it back is not impossible. HELOCs today are not what they were 20 years ago. Some close automatically if not used for a certain time period.
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Old 03-03-2017, 06:52 AM
 
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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 .
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Old 03-03-2017, 07:16 AM
 
Location: Close to an earthquake
890 posts, read 677,754 times
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I'm bullish on home equity lines of credit to give comfort for those "just in case" situations. I've used mine for years as an extension of my cash available resources that allowed me to sweep excess cash resources to pay down real estate debt beyond what I would normally have been comfortable doing.

In other words, my cash resources were drained to minimal amounts by rapidly paying down real estate debt knowing that I could pull it back out when needed for a not-anticipated situation. When this occurred, and it wasn't often, I continued rapidly paying back the amount borrowed as quickly as possible. I viewed my cash resources and the line as a "dynamic duo" in my personal cash management.

As a result of following this practice for many years, I became debt-free much sooner than I ever thought. I still have this $300,000 line but can't imagine ever needing it for anything substantial.

This won't work for everyone but for those that it does work, it's great.
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Old 03-03-2017, 07:29 AM
 
642 posts, read 531,394 times
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Thanks for all the responses!

With new rules and so on, it kind of sounds like its not worth all the trouble. Just to have.

Back 18-20 years when we had a HELOC it was a easy process to get and I believe it had no expiration or have use time restrictions. At the time we had a lot of equity and both had good paying jobs.
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Old 03-03-2017, 10:10 AM
 
Location: Saint John, IN
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I personally would not have one in retirement if your home is already paid off. If you are only looking to have one for emergency purposes then I would just have a credit card just for that purpose only. If you end up using it for something major then you could always transfer the balance to a new card with zero percent interest for 12-18 months.
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Old 03-03-2017, 10:42 AM
 
Location: Idaho
1,455 posts, read 1,156,015 times
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Quote:
Originally Posted by CGab View Post
I personally would not have one in retirement if your home is already paid off. If you are only looking to have one for emergency purposes then I would just have a credit card just for that purpose only. If you end up using it for something major then you could always transfer the balance to a new card with zero percent interest for 12-18 months.
What is the downside of having a HELOC in retirement and especially when the home is already paid off?

We had our home paid off years ago and very glad that we have a HELOC IN RETIREMENT. We plan to buy a home in a new state before selling the current home. The HELOC may come in handy to add to whatever required down payment so that we can get a mortgage if it is based only on our retirement income and not our asset. After we sell the house, we can use the proceed after the HELOC loan to pay toward the mortgage on the new home.

Without HELOC, we will need to sell off some of our equities for the down payment without being able to pick the optimum time to sell (considering market condition and tax implications).

I also do not understand the advice to use credit card for emergency purposes instead of a HELOC. On theory, it is better to pay 0 % interest for 12-18 months than the 4% or so interest of a typical HELOC. However, I do not know how easy it is to obtain a new credit with decent limit in retirement and how many cc companies which allow it or how often that you can transfer a balance to a new card to get 0% interest. I also do not know whether a HELOC or a cc balance has more of negative impact on one's credit card. My gut feeling is that a HELOC type has less of an effect because it is a secured loan. In addition, if a credit card loan is more advantageous, one can still choose to do so WHILE already have a HELOC. I am not sure how easy it is to get a HELOC when one already has a lot of cc debts.

Back to the OP's question, I'd suggest to go ahead and check on obtaining a HELOC. You may still be able to obtain one without any closing cost, minimum balance, annual fee, pre payment penalty or expiration date. There are no costs in checking out and no disadvantages that I can see in getting one if there are no strings attached to the loan.

Last edited by BellaDL; 03-03-2017 at 11:16 AM..
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Old 03-03-2017, 10:52 AM
 
Location: Boise
608 posts, read 582,468 times
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Another option if you are over 62 and have at least 50% equity, look at the HECM line of credit. It doesn't expire and it actually grows over time. The growth rate is about 5% per year, so available credit would double in about 14.4 years.

It also doesn't require a monthly y payment if you choose not to, how many bank HELOCs can offer that?

Find a local person to help you with the HECM line of credit. Its too important to trust to a call center employee.
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