Houston, TX · Member since 2019 · 28 posts · 27 votes
Thinking of doing a HELOC... what are the pros and cons of repaying it?
From my point of view, why would I do a HELOC versus saving up and using cash. Paying interest on an amount of money that I could've just saved doesn't make sense to me. I like the idea of a HELOC and using the equity built up in the house but I am just struggling with wrapping my head around why it makes sense to do.
I understand there's different strokes for different folks. I'm all about taking the risk and leveraging different opportunities.. maybe someone could recommend a good book to me so that I can educate myself further on the benefit of doing a HELOC?
Rental Property Investor · Escondido, CA · Member since 2018 · 268 posts · 137 votes
5y
I don't want to give advice necessarily because everyone's individual situation, goals, and personality are different. That said, some might say that equity is in a way useless, almost theoretical money, until you put it use or convert it. In other words, it's just sitting there. So, if there were an option to deploy equity into an investment which earns you money, an argument could be made that would be an approach to consider. If you are in a position where you can save that money as well, you would be in a position where you could see how the investment is going and then either pay the HELOC off more aggressively, or use the money you'd saved in the meantime to move on to another investment. Again, not advising, but offering some thoughts.
Investor · Cleveland, OH · Member since 2015 · 6k+ posts · 2k+ votes
5y
@Stephanie Money, you say you're "all about taking the risk and leveraging different opportunities", so I hope you realize that a HELOC is much like a Credit Card ie. You don't pay any Interest on it until you've bought something with it.
Question: Are those same "opportunities" going to wait until you've saved up enough?
Answer: No.
As for repaying the HELOC, isn't that the job of those same (income-producing) "opportunities"? Answer: Yes. Cheers...