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.
- posted 12 years ago