Archive for June 26th, 2009

HELOCs Not Going Away

I readily admit I’m no financier or prognosticator such as the likes of Wall Street or Chairman Ben Bernanke of the Federal Reserve (neither federal, nor reserved – but that’s another story!).

I’m a nature lover and a writer with some common sense about money. I like it. I seek more of it. If money is the chalk on the scoreboard of life, I desire more chalk to make my mark(s). I’m attracted to good luck, or luck is attracted to me.

Mortgage acceleration naysayers whine that it’s impossible to get a Home Equity Line of Credit (HELOC – pronounced HEE-lock). Not so. It’s just harder to get a credit line on equity if you have no equity! doh!

If more than 20% of your home is either paid for or above the remainder of your loan due to increased value from economics or home improvements, you get a HELOC for the balance above 20% that is yours (equity).

My proof that banks still love HELOCs is based on two experiences.

  1. A few months ago, a Wells Fargo representative called me to thank me for using my HELOC, and to ask if she could do anything for me (to help me use more, I assumed). I asked her how hard to get HELOCs had become, citing the once-standard “20% down rule” for mortgage loans, and she agreed with that. If you own 20%, all that you own above 20% is available to borrow against as in a HEL or HELOC (take only the latter, please!).
  2. Yesterday’s mail brought a $50 gift card to our choice of 100+ stores to “thank us” for using our HELOC.

Often people ask me whether the banks will quit offering HELOCs when they realize we’re using them to pay down mortgage principal in chunks, thus preserving (or increasing) personal cash flow. The naivete of that query is based on the thought that the programmer (and possibly writer) who sends you direct (mass) mail is also looking at your specific account and contemplating what you might be doing with your $700-$10,000 withdrawals (or transfers) for your mortgage principal.

Gigantic corporations, and many small ones, do not have the staff power or interest in second guessing your financial plans.

HELOCs are not going away. If banks find a way to indenture us for even more interest (us being people who don’t pay attention and have no idea of mortgage acceleration by using our house to pay for our house, thus becoming mortgage free years sooner), the product that may one day replace a HELOC will be even more usable.

Meanwhile, you should get on board and use what banks now give us, to pay off your home years earlier and thus live the good life in your retirement — debt free including your mortgage!

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