This might literally be the worst time to take out a HELOC. You have almost no equity in the house and real estate will be following the market if this drags on for too long. I wouldn't even use cash right now unless you have an emergency fund.
HELOCS: School me
- Thread starter lilcoop03
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You have around $60K equity on a home you hope is worth around $300K. So, 20% equity. In 2008 the average house price in America dropped 29% (Forbes,com). Some sources say 35%.
Current situation could result in a recession that could see even larger drops than in '08.
You may not even qualify for Heloc at those ratios. Definitely wouldn't where I live. You reduce your options and ability to react to the situation you find yourself in the more you are leveraged. You increase life stress with greater debt. With a family expansion on the horizon you will have an increase anyway. Do you really want to add what could be catastrophically more?
Like many here, I would suggest prioritizing projects, completing them on a need rather than want basis. If there's one thing I am sure of it is that a little delayed gratification now results in massively better finincial situation in a very few years later.
I got my MBA in my late 20''s, lived lean but well (same volume but 10 buck wine instead of $25 kind of thing, lots of DIY) and avoided borrowing and interest paying. Going the conservative route was super low stress so I'm still on first marriage (32 years) and was able to retire in my mid 40's. There are still guys I graduated with who have a mortgage because they wanted the flash lifestyle early. If that's what works for a guy, that's cool but I can tell you debt free opens up opportunities and makes life pretty darned good.
All the best to you on the Masters degree and upcoming family addition. Exciting times!
Current situation could result in a recession that could see even larger drops than in '08.
You may not even qualify for Heloc at those ratios. Definitely wouldn't where I live. You reduce your options and ability to react to the situation you find yourself in the more you are leveraged. You increase life stress with greater debt. With a family expansion on the horizon you will have an increase anyway. Do you really want to add what could be catastrophically more?
Like many here, I would suggest prioritizing projects, completing them on a need rather than want basis. If there's one thing I am sure of it is that a little delayed gratification now results in massively better finincial situation in a very few years later.
I got my MBA in my late 20''s, lived lean but well (same volume but 10 buck wine instead of $25 kind of thing, lots of DIY) and avoided borrowing and interest paying. Going the conservative route was super low stress so I'm still on first marriage (32 years) and was able to retire in my mid 40's. There are still guys I graduated with who have a mortgage because they wanted the flash lifestyle early. If that's what works for a guy, that's cool but I can tell you debt free opens up opportunities and makes life pretty darned good.
All the best to you on the Masters degree and upcoming family addition. Exciting times!
Because of situations like we're in right now, the market is not guaranteed to make 9%. I'd rather pay off my house in 10-15 years while investing 15% of my income. I'll have well over a million just doing that, not including investing all of my money once my house is paid for. Plus pension and social security (hopefully).
I'm not saying you're wrong, there are arguments to both sides.
I don't disagree.
I've never been an advocate for borrowing money for anything other than a mortgage, even in the best of financial times.
I would also be the dick in this thread if I said "I told you so" to have a 3-6 month emergency fund, so I won't.
It’s not about the stock market right now. Over the past 30 years it’s averaged 9-10% returns. There are tons of scenarios that show the return is greater if you were to straight invest vs pay down your home.
I don’t think there is a wrong side idea wise as long as you’re doing something. However. Mathematically, one is greater than the other.
I understand if you're looking at 30 years, but some us don't have 30 more years to make the return. This market may not come back for years, who knows.
Suppose i'm set to retire in a couple years and I've been investing heavily and now the market has tanked and I have years of mortgage left. Then what? Keep working?
Obviously it's different for each person and where they're at in life, and what risk they want to take. Like you said, there is no right or wrong answer, but I would prefer to be debt free.
EDIT: To be fair, we are taking the extra money that we were putting towards the house and investing, but only because the market it so low and I do have 14 years to retirement. So in this market I believe it will pay off. It is a gamble though...
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