Mortgages and Aging... An Epic struggle: Part 2, For HELOC's Sake!

No... I'm not a Snake Oil Salesperson when I tell you that a HELOC, Home Equity Line of Credit, is a miracle drug.   It can do 1,001 wonderful things including:

• Fix your roof
• Pave your driveway
• Get you emergency cash
• Help keep you safe from any other emergency
• Get rid of some nasty debts with high interest rates
• etc

Ladies and Gentlemen, I feel confident in saying EVERY HOME OWNER NEEDS A HELOC!!!

Ok... I won't point fingers but I can already hear the grinding of teeth and steam blowing from some of the skeptical Realtors' ears while I'm reading this.  I feel fairly certain that as I am typing this, some of them are feeling a major disturbance in the force!

But here's the scoop... I believe the HELOC is the almighty savior in Real Estate Finance and is Far, Far underutilized by those who should have them...and I'll admit... they're Far Far overutilized by those who shouldn't...

HELOCs are like Credit Cards attached to your equity.  As you use them, little bits of your equity go to pay for whatever you use them for.  The payment that is attachced to these loans is interest only - which makes them easier to afford than a Home Equity Loan.  You can pay them off at any time with no penalty and then reuse them whenever you need them again.  Often times, a checkbook and even a "credit" card will come with the HELOC account that you can use wherever and wherever necessary.

My personal feeling now that I live down in Hurricane Country of South Florida is that the need for a HELOC is greater here than in places where natural disasters are less likely to happen.  Why? Because if a storm comes through town and takes off your roof - having a HELOC gets you the cash you need to repair the roof IMMEDIATELY.

When you are a senior - or even just someone tight on cash - this can be a lifesaver... and can also help you maintain the value of your home by keeping it in a good state of repair.  Nothing devalues a home more than costly, deferred maintenance!

The best thing about a HELOC is that most of them COST NOTHING to start, have little or no annual fees, and can be paid off at any time.  Sometimes there is a fee for closing them before 30 months, but why would you close it when it costs nothing??

Let's try another example... a car.. in my first segment, Credit Issues for Seniors, I discussed how seniors are often Credit Challenged... but if their car breaks down and needs to be replaced, a suitable loan program for a car may not be available.  In fact, dealers often have "No Credit, No Problem" loans and they do not disclose that there is a 12-15% interest rate on those loans.  When the monthly payment seems ok over 4-5 years, people think it is a good deal.  Meanwhile the dealer is making a LOT of money on that car.  When this happens, the HELOC can provide the cash needed to buy the car outright... then the monthly payment will not be such a burden.  This could mean a better, safer car at an affordable monthly price! 

My biggest concern that really hits home with a lot of people is unexpected medical expenses.  They can get enormous very quickly - and can cause loads of problems.  The HELOC is an aid in these times.

Caveat Emptor... this is the obligatory The Mortgage Go To Guy line... HELOCs just like any other mortgage product require discipline when using them.  They are not bottomless bags of money - and if you tap yours out, you basically have nothing left in your house. 

If you are helping your parents with their finances, the HELOC can be a great help to you because you know there's always room to find Mom and Dad cash for their unexpected life expenses.  But remember that the bill needs to get paid just like every other one every month.  Most lenders will want to try to get an automatic payment so that means you as the financial helper need to make sure that the date that it draws is a date a few days after their pension gets deposited!

A HELOC can mean the difference in comfortable living for a senior (or anyone) and a panicked existence when something transpires that requires someone to dip into that all too valuable emergency cash... or heavens forbid the living expenses.

Here are Links to the Other Segments:

1. Introduction
2. Credit Issues for Seniors
3. Flow Flow Flow the Cash
4. The Cash in the Mattress vs The Cash in the Walls
5. If you've got it... Plan it!
6. As a last resort...