Hey all,
My wife and I are trying to decide whether we should open a HELOC or not. Our income is variable so I keep an "emergency fund" on hand of over 1 year's expenses, or two year's expenses if we make logical cut backs (I use quotes above because about 70% of this money is invested in the market via my taxable brokerage account). I'm also an avid credit card collector (I love those $25 - $50 rebates just for using a card once!), although we have no debt except our mortgage and whatever is on the credit cards we use on a daily basis (paid in full each month). I haven't added it up but we probably have another 1 - 2 years expenses in credit on these cards.
My wife would like to open a HELOC as an addtional funding safety net, arguing that the interest rates tend to be much lower than credit cards, should we need funds exceeding our emergency fund. I argue that using a HELOC for something like getting through an unemployment period would mean that we're securing day-to-day expenses, like groceries and gasoline, against our house. On the other hand, if we had an emergency expense that made sense to secure against the house, like needing a new roof, we would likely have the time and employment necessary to open the HELOC, thus avoiding closing costs now.
I'd be interested to hear what y'all think about this situation.
Thanks!
-Will