HELOC or not?

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sadie wess
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HELOC or not?

Post by sadie wess »

I have no debt and use cash for big items like autos and a new roof.

I have great credit, own my own home, and will retire at 62 years old by year end.

I have most investments diversified with Vanguard and current balance is over 4 million. I do no trading and am a long term investor.

I was at Wells Fargo yesterday checking out my balance minimums and their Customer Service Rep. urged me to apply for a HELCO before retirement.


What is the point of my having a HELOC?

Thank you,

Sadie
CaptainSaver
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Re: HELOC or not?

Post by CaptainSaver »

Doesn't sound like you would benefit much from one.

Opening one would give you a line of credit with a lower interest rate than credit cards or other loans.

If you are paying cash for items like cars and roofs I don't really see what use the HELOC would be to you.
sgm7091
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Re: HELOC or not?

Post by sgm7091 »

Many banks offer HELOC with no closing cost. Some of them will force you a draw minimum to get that.

We are not retired but I have had heloc for last 10 years plus as a credit line, more as a cushion. I used it for buying car or wedding on short term until CDs matured to pay it off. I have been able to get them from credit union or bank without forcing a minimum draw and no closing cost. The heloc also acts as emergency extension, should we need it. It has not costed anything.

Perhaps the bank is suggesting heloc before retirement, because it could be harder to qualify after you retire ! I don’t know. If you can get it without any cost or forced draw, perhaps not a bad idea. But it does put a lien on your house until closed.
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Sandtrap
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Re: HELOC or not?

Post by Sandtrap »

sadie wess wrote: Fri Jan 31, 2020 1:56 pm I have no debt and use cash for big items like autos and a new roof.

I have great credit, own my own home, and will retire at 62 years old by year end.

I have most investments diversified with Vanguard and current balance is over 4 million. I do no trading and am a long term investor.

I was at Wells Fargo yesterday checking out my balance minimums and their Customer Service Rep. urged me to apply for a HELCO before retirement.


What is the point of my having a HELOC?

Thank you,

Sadie
The advantage of a HELOC is you would have a line of credit for funds that you need if you did not want to take those funds from your portfolio.
However, given your portfolio size, and not knowing other financial details, why would you want to tap into a HELOC and pay interest if you don't have to.

Wells Fargo customer service rep = sales person.
HELOC = product

j :D
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Gretchen
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Re: HELOC or not?

Post by Gretchen »

I'm very happy that we got a HELOC right before I retired in late 2014. DH had retired several years prior.

Our cash flow requirements are averaging around 4% of our portfolio, but our needs are lumpy. When we're right below a tax bracket bump, it's often cheaper to take a one-year fixed on the HELOC (2.5%-3.4%) to bridge us a few months into a new calendar year, and then pay it off quickly as we pull the new year's RMDs. We managed to keep our capital gains tax at 0% in alternate years by artificially depressing our income that way.
gclancer
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Re: HELOC or not?

Post by gclancer »

Gretchen wrote: Fri Jan 31, 2020 6:39 pm I'm very happy that we got a HELOC right before I retired in late 2014. DH had retired several years prior.

Our cash flow requirements are averaging around 4% of our portfolio, but our needs are lumpy. When we're right below a tax bracket bump, it's often cheaper to take a one-year fixed on the HELOC (2.5%-3.4%) to bridge us a few months into a new calendar year, and then pay it off quickly as we pull the new year's RMDs. We managed to keep our capital gains tax at 0% in alternate years by artificially depressing our income that way.
This is exactly what you would use the HELOC for. Also if you decide to downsize and don’t want to sell taxable investments you could buy using the HELOC, move, and then sell your current home when it’s empty/decluttered. If those two things don’t appeal to you don’t bother.
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Wiggums
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Re: HELOC or not?

Post by Wiggums »

Sandtrap said it best:

Wells Fargo customer service rep = sales person.
HELOC = product

That’s the main reason Wells is justifying why one needs a HELLOC.

I don’t have one and I’m retired. :-)
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Stinky
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Re: HELOC or not?

Post by Stinky »

A HELOC gives you quick access to cash, at a relatively low interest rate. There might be an annual fee to keep it open.

It sounds like you have no need for it.

The WF banker motivation likely was that he/she gets compensated for opening new accounts. Whether or not they’re needed.
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Re: HELOC or not?

Post by Watty »

sadie wess wrote: Fri Jan 31, 2020 1:56 pm What is the point of my having a HELOC?
I use mine to help manage my taxable income to keep it low enough to get an affordable healthcare act subsidy.

If you will be using ACA policies with a subsidy until you get on Medicare it would not hurt to have one set up just in case you need it if you have some large unexpected expense.

If you decide to get one then it is likely that there are much better places to get one like a credit union.

Mine did not cost anything to set up and there are no fees other than the interest I pay when I have a balance in any given month. As I recall when I eventually close the HELOC there may be a $100 or so fee by my county for recording the lien release.
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Re: HELOC or not?

Post by GoFish »

We just opened a HELOC against our paid-off home. We are deep in the process of buying a new home and moving to another state.

The purpose of the HELOC, in our case, is to:
  • Pay for some deferred maintenance on the old house before listing
  • Help pay for moving expenses
  • Fund some improvements to the new house right after we move in
Once the old house is sold, the HELOC is paid off and goes away. We will use the HELOC only for one-time expenses associated with the move, and nothing else. In my mind, this an appropriate use of debt.
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Re: HELOC or not?

Post by abuss368 »

sadie wess wrote: Fri Jan 31, 2020 1:56 pm I have no debt and use cash for big items like autos and a new roof.

I have great credit, own my own home, and will retire at 62 years old by year end.

I have most investments diversified with Vanguard and current balance is over 4 million. I do no trading and am a long term investor.

I was at Wells Fargo yesterday checking out my balance minimums and their Customer Service Rep. urged me to apply for a HELCO before retirement.


What is the point of my having a HELOC?

Thank you,

Sadie
My parents are in the same position. One simple checking account and one simple credit card. Then the portfolio. Cash in money market. No need to have a LOC or debt. Provides a lot of financial flexibility.
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Re: HELOC or not?

Post by abuss368 »

We have Wells Fargo. They are always trying to sell something. Online or even ads at the ATM machine. I ignore it all.
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Klmaxx
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Re: HELOC or not?

Post by Klmaxx »

Helocs are good for dealing with unexpected cash outflows. We used ours last year to help one of our children purchase a home. Without the HELOC, we would have had to liquidate investments and incur CG taxes.
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Re: HELOC or not?

Post by unclescrooge »

After 911, the stock market was closed for a week.

It is conceivable that it may be closed again in the future, maybe for a longer period. Having a HELOC gives you access to money quickly.
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Re: HELOC or not?

Post by SR II »

GoFish wrote: Fri Jan 31, 2020 8:01 pm We just opened a HELOC against our paid-off home. We are deep in the process of buying a new home and moving to another state.

The purpose of the HELOC, in our case, is to:
  • Pay for some deferred maintenance on the old house before listing
  • Help pay for moving expenses
  • Fund some improvements to the new house right after we move in
Once the old house is sold, the HELOC is paid off and goes away. We will use the HELOC only for one-time expenses associated with the move, and nothing else. In my mind, this an appropriate use of debt.
We did just this, except used it in reverse. Opened a no-cost HELOC (no appraisal, no minimum draw and no yearly fee) right before retiring. Started drawing from it a year later to fix up "downsized" home in another state, on moving costs, then to "fluff up" old house and stage it before putting it on the market. Paid it off with closing of house sale. This whole process took about six months from beginning of draw to pay off. We didn't want to liquidate assets for this "bridge loan".
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Re: HELOC or not?

Post by abuss368 »

unclescrooge wrote: Fri Jan 31, 2020 9:01 pm After 911, the stock market was closed for a week.

It is conceivable that it may be closed again in the future, maybe for a longer period. Having a HELOC gives you access to money quickly.
Keep money in a bank.
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Re: HELOC or not?

Post by abuss368 »

unclescrooge wrote: Fri Jan 31, 2020 9:01 pm After 911, the stock market was closed for a week.

It is conceivable that it may be closed again in the future, maybe for a longer period. Having a HELOC gives you access to money quickly.
If stock market is closed could one still transfer cash from Vanguard prime money market fund to the bank?
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Re: HELOC or not?

Post by Stinky »

abuss368 wrote: Fri Jan 31, 2020 9:23 pm
unclescrooge wrote: Fri Jan 31, 2020 9:01 pm After 911, the stock market was closed for a week.

It is conceivable that it may be closed again in the future, maybe for a longer period. Having a HELOC gives you access to money quickly.
If stock market is closed could one still transfer cash from Vanguard prime money market fund to the bank?
I’m interested in hearing what happened with Vanguard (or Fidelity or others) during the week after 9/11/2001, as it relates to both money market and other mutual funds.

Did folks have any access to those funds at all before the stock market opened - I think on Monday 9/17/2001. I didn’t have a VG account back then, so I have no knowledge.
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Re: HELOC or not?

Post by carolinaman »

I have had HELOC for more than 20 years and have used it for remodeling, car purchases and other big ticket items. I am retired now and have the funds to pay cash for whatever we want or need. However, it is sometimes convenient to use HELOC on a temporary basis rather than sell investments: ETFs, mutual funds, CDs, etc. Also, I can do this in one day whereas selling investments may take 2 or 3 days even though I have my bank account connected to my investment company. We do not keep much money in cash. Whenever I use the HELOC I repay it within a few months. Even with $4M you may find this useful.
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Re: HELOC or not?

Post by Flashes1 »

I've thought about this a little bit for my situation as I prepare for retirement:

* No mortgage on a $1 million home.
* I plan on maintaining 2-3 years of expenses in cash/short term bonds to pay expenses especially big ones like a new roof or car.
* On the surface, it doesn't look like I need a HELOC, however, the amount I have in cash/short term bonds is not set in stone, and I have this house that I have a ton of equity in, but is very illiquid.
* A HELOC would give me instant access to this equity - and being able to write a check for $50k-$100k for a new car, etc. would be very convenient.
* I love my current HELOC - I have a looming $9k-$11k tax bill coming due on 4/15 and it's nice to know I can write a check for it.
* I would want to negotiate the lowest possible fees for a HELOC in retirement (no closing costs or appraisal fee) - if I can get comfortable with the fees it's very likely I'll get the HELOC.
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Re: HELOC or not?

Post by unclescrooge »

abuss368 wrote: Fri Jan 31, 2020 9:23 pm
unclescrooge wrote: Fri Jan 31, 2020 9:01 pm After 911, the stock market was closed for a week.

It is conceivable that it may be closed again in the future, maybe for a longer period. Having a HELOC gives you access to money quickly.
If stock market is closed could one still transfer cash from Vanguard prime money market fund to the bank?
Yes, Vanguard was still open but there was no buying or selling of securities.

There were two brokerage companies, espeed and Cantor Fitz Gerald housed in the world trade center building. Both companies were decimated in the attacks. Not sure what happened to their clients money. They probably got everything back but it probably took a few months.
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Re: HELOC or not?

Post by 4nursebee »

If you were to need a HELOC, opening the line of credit while working and having INCOME is easier. When retired, proving income is not as easy (or so I understand). Sounds like it was good advice if you might need it.

We closed our HELOC pre retirement to minimize the chance for fraud and felt comfortable doing so as we projected to have 2 years of living expenses readily available.
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Re: HELOC or not?

Post by El Greco »

Why not? It doesn't cost anything unless you use it. Just one more tool to have in your financial arsenal. I've always had one, since I've owned a home and used it on occasion to good effect. I plan to have one in retirement as well. I don't see any downside to having an instantly available, low interest loan at my disposal.
Topic Author
sadie wess
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Re: HELOC or not?

Post by sadie wess »

gclancer wrote: Fri Jan 31, 2020 6:45 pm
Gretchen wrote: Fri Jan 31, 2020 6:39 pm I'm very happy that we got a HELOC right before I retired in late 2014. DH had retired several years prior.

Our cash flow requirements are averaging around 4% of our portfolio, but our needs are lumpy. When we're right below a tax bracket bump, it's often cheaper to take a one-year fixed on the HELOC (2.5%-3.4%) to bridge us a few months into a new calendar year, and then pay it off quickly as we pull the new year's RMDs. We managed to keep our capital gains tax at 0% in alternate years by artificially depressing our income that way.
This is exactly what you would use the HELOC for. Also if you decide to downsize and don’t want to sell taxable investments you could buy using the HELOC, move, and then sell your current home when it’s empty/decluttered. If those two things don’t appeal to you don’t bother.
Both good reasons. Thanks
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sadie wess
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Re: HELOC or not?

Post by sadie wess »

El Greco wrote: Sat Feb 01, 2020 10:28 am Why not? It doesn't cost anything unless you use it. Just one more tool to have in your financial arsenal. I've always had one, since I've owned a home and used it on occasion to good effect. I plan to have one in retirement as well. I don't see any downside to having an instantly available, low interest loan at my disposal.
I have started the process but have not yet sent a copy of my home insurance and, gulp, 2018 income tax returns.
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sadie wess
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Re: HELOC or not?

Post by sadie wess »

carolinaman wrote: Sat Feb 01, 2020 7:10 am I have had HELOC for more than 20 years and have used it for remodeling, car purchases and other big ticket items. I am retired now and have the funds to pay cash for whatever we want or need. However, it is sometimes convenient to use HELOC on a temporary basis rather than sell investments: ETFs, mutual funds, CDs, etc. Also, I can do this in one day whereas selling investments may take 2 or 3 days even though I have my bank account connected to my investment company. We do not keep much money in cash. Whenever I use the HELOC I repay it within a few months. Even with $4M you may find this useful.
Hmm...true. I hate the bank knowing so much and handing over my income tax returns, but it sounds like a good idea because I will be setting aside cash for 3 years living expenses. I cannot have too much income because I will be trying to get health insurance via ACA.
chevca
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Re: HELOC or not?

Post by chevca »

I don't see the need or the point of a HELOC for someone with $4M and pays cash for everything. You are your own HELOC. :happy
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sadie wess
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Re: HELOC or not?

Post by sadie wess »

Watty wrote: Fri Jan 31, 2020 7:38 pm
sadie wess wrote: Fri Jan 31, 2020 1:56 pm What is the point of my having a HELOC?
I use mine to help manage my taxable income to keep it low enough to get an affordable healthcare act subsidy.

If you will be using ACA policies with a subsidy until you get on Medicare it would not hurt to have one set up just in case you need it if you have some large unexpected expense.

If you decide to get one then it is likely that there are much better places to get one like a credit union.

Mine did not cost anything to set up and there are no fees other than the interest I pay when I have a balance in any given month. As I recall when I eventually close the HELOC there may be a $100 or so fee by my county for recording the lien release.
Thanks Watty, I am going to try to do the same thing regarding health insurance. The ACA thing confuses me but there seem to be a lot of folks with a lot more income than I have and they qualify.
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Re: HELOC or not?

Post by abuss368 »

Flashes1 wrote: Sat Feb 01, 2020 8:14 am I've thought about this a little bit for my situation as I prepare for retirement:

* No mortgage on a $1 million home.
* I plan on maintaining 2-3 years of expenses in cash/short term bonds to pay expenses especially big ones like a new roof or car.
* On the surface, it doesn't look like I need a HELOC, however, the amount I have in cash/short term bonds is not set in stone, and I have this house that I have a ton of equity in, but is very illiquid.
* A HELOC would give me instant access to this equity - and being able to write a check for $50k-$100k for a new car, etc. would be very convenient.
* I love my current HELOC - I have a looming $9k-$11k tax bill coming due on 4/15 and it's nice to know I can write a check for it.
* I would want to negotiate the lowest possible fees for a HELOC in retirement (no closing costs or appraisal fee) - if I can get comfortable with the fees it's very likely I'll get the HELOC.
I have not used a LOC for a car purchase in decades. All the car dealers have essentially 0% or close to that. In addition, I recall reading how a HELOC is less attractive today from a tax standpoint since most taxpayers are now filing with a standard deduction.

Yes, it would provide for additional financial flexibility if needed.

We obtained a Personal LOC at Wells Fargo. No fees to apply or maintain.
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Re: HELOC or not?

Post by abuss368 »

chevca wrote: Sat Feb 01, 2020 10:42 am I don't see the need or the point of a HELOC for someone with $4M and pays cash for everything. You are your own HELOC. :happy
Fair and reasonable point. The dividend income at a yield of 2% would be $80,000 a year alone!
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Re: HELOC or not?

Post by willthrill81 »

Some banks offer very low cost HELOCs. I believe that Chase will set up one for $50 and only charge a $50 annual fee for it. At that level, if you think that there's any realistic chance of needing one, it seems like a no-brainer to get one.
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Re: HELOC or not?

Post by abuss368 »

Wells Fargo wanted to charge an initial $50 fee. I simply told them I would not pay and go elsewhere with our banking relationship. They waived it.
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Re: HELOC or not?

Post by tennisplyr »

Did they say why you should get one? If they are trying to scare you that you won't qualify after you retire don't buy it. From the limited info you provided, you seem financially sound.
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Re: HELOC or not?

Post by El Greco »

willthrill81 wrote: Sat Feb 01, 2020 1:28 pm Some banks offer very low cost HELOCs. I believe that Chase will set up one for $50 and only charge a $50 annual fee for it. At that level, if you think that there's any realistic chance of needing one, it seems like a no-brainer to get one.
My current HELOC is with a Credit Union. There were no closing costs, application fees and no annual fees either. The exception is for lines over 500K. This is not a specialized credit union either, it is open to anyone.
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