Wednesday, May 16, 2012

Home Equity Line of Credit - GOOD OR BAD?

Recently I read the good news in the National Post that Canadians were averaging less money owed on their credit cards.  Hurrah I thought - people are finally getting it, they're paying off their credit cards and charging less, reducing debts - yay!  Credit crisis averted!

Then I read the bad news...people weren't really paying off their credit cards, no, instead they were transferring their credit card balances to their Home Equity Line of Credit!! Now, if they'd just stopped there things might not have been so bad because the interest rate on HELOCs is usually much lower than the interest payable on credit cards. BUT, and there's always a BUT isn't there, once people had cleared the balances off their credit cards they just went right back to using them again.  So in reality people's homes, the equity in their homes, was paying for dinners out, tanks of gas, several new outfits and the million other sundry items people regularly put on their credit cards.

I've had a HELOC for the past seven years. It worked really well for me and the interest rate varied from a low of 2.25 % to 3.5%.  I used my HELOC to buy my trailer.  I also used it to buy a car three years ago. The best rate I could get on a car loan was 7.99%.  I NEVER EVER transferred any credit card balances to it or used it for anything foolish. In April I paid off my HELOC and I went to the bank yesterday to close it as well as my chequing account. I now bank only with ING.  What I didn't realize though was that I would have to pay lawyer's fees to have the HELOC discharged. So now I need to somehow squeeze $272.00 out of May's budget which has already been squeezed dry. Perhaps I could put that fee on a credit card hahahahaha!


Sluggy said...

Yes, put that fee on a credit card....rolling eyes with
You are so weird....paying for stuff with cash and getting off the credit merry-go-round.
I like weird!!! ;-)

What is wrong with our society, that we want to pay for things with money we don't have yet?  We can't wait to afford stuff to buy it?
Have we no self control with money?
Don't answer that....I KNOW the

kim said...

Oh Jane my Heloc was my downfall.  I just kept paying off my cards and saying this will be the last time and it never was.  I did use the Heloc to pay about $35,000 worth of drugs that the insurance would not pay for and I am glad I am better but $35,000 more was just plain stupidity.  It is closed now and never again.

the444 said...

What a bite that you have to pay a fee to close out the HELOC!  I guess they expect people to never close them out - that's what it looks like, huh?

Anyway, it's a good thing you paid it off.  Don't join the legions of people merely squatting in bank-owned homes.  Because that's what it amounts to, right?

Louise said...

worth the money to be done with the bank! we've never had a HELOC but years ago we did have an overdraft which was just as tempting!

Jharrison56 said...

Yes, there's always a cost to doing business isn't there. I'm really leaking the $$ this month but there is a light at the end of the tunnel!

Jharrison56 said...

Absolutely! And I want to sell the condo in a couple of years so don't want to have any liens on the place when i go to sell. The bank gets you coming and going. No doubt I had to pay to set up the HELOC too!

Jharrison56 said...

Thank goodness you got it paid off and closed. It's such a temptation and the banks make it so easy. That sure is a hell of a pile of money for drugs but I know it's different in the States for a lot of people. It's a shame though that you had to pay so much. But you can't put a price on health.

Ann said...

You know Jane, you could leave the HELOC on. You've got enough discipline to not use it again so it's not costing you anything. In two years when you retire (it is two years, isn't it?) and sell your condo, you're going to need to use a lawyer. Transferring the title of your property, along with discharging the HELOC will all be done at the same time for the same fee. I wouldn't worry about it right now. My advice would be different if you weren't planning on moving to the awesome, lovely, beautiful east coast. (We'll be practically neighbours).

Jharrison56 said...

I used to roll MY eyes at my parents who paid cash for everything and didn't buy anything they didn't have to money for!  Needless to say our house had NO EXTRAS!  I think that I am very fortunate to remember a different time and a different way of doing things. My dad HATED DEBT with a passion and worked extra hours to pay off the mortgage. They both grew up during the depression and it had a HUGE impact on them. Nothing was wasted, everything reused or repurposed. We'll end up like that again i think.

Jharrison56 said...

Excellent advice Ann, thanks! The EAST COAST is the best coast isn't it!?!

mhimes said...

Just cut out paying for porn.  You can now get it free on the Internet!
You're welcome!

Maureen Cairney said...

Looks like you and I are into cinching that belt, any tighter and I will be turning blue. Cash rules OK

SonyaAnn said...

Another frugal gal! I love to hear other people's stories and how they save. It always keeps me motivated to do more. 

Marguerite said...

We just opened one of these credit lines to deal with our roof!  Right now we're very happy with paying half the rate of interest that a regular line of credit would cost but man I was ticked when I found out all the fees to just get the credit in the first place.  Rotten banks are making money hand over fist for simply allowing you to borrow, makes me see red.

Jharrison56 said...

Makes me see red too! You'll be paying again when you want to close it down!

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Subject: [jamhair] Re: Life DOESN'T Begin at Retirement - LIFE Begins TODAY!!: Home Equity Line of Credit - GOOD OR BAD?

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