Episode 34: Everything You Need To Know About A HELOC

Jul 20

In today's episode of the Holistic Money Podcast, I dig into the topic of HELOCs (home equity lines of credit).I explain the concept of a HELOC, its benefits, and how to qualify for one. Emphasizing the importance of strategic and responsible borrowing, I discuss various ways to use a HELOC, such as investing in income-generating assets, paying off high-interest debt, and using it as an emergency fund.

I also highlight the potential risks and costs associated with HELOCs, including the possibility of losing your home if you cannot repay the loan. I will help you better understand HELOCs and how they can be utilized to achieve financial goals effectively and responsibly. Let's embark on a journey to financial freedom and wealth creation without the constraints of traditional budgeting methods.

Key highlights

[00:00:00] Holistic Money Podcast intro

[00:00:59] Introduction to today’s topic: Why now is a great time for a HELOC

[00:02:55] What a HELOC is and how it operates

[00:03:58] Requirements for one to qualify for a HELOC

[00:04:41] The greatest risk of HELOCs

[00:05:10] Different fees associated with HELOCs

[00:06:48] Why take a HELOC as opposed to a home equity loan

[00:09:18] Different ways one can use a HELOC

[00:11:03] How a HELOC gives you access to an additional pot of emergency funding

[00:12:27] Why you should start making your principal payments earlier

[00:13:37] Holistic Money Podcast outro

Notable Quotes

HELOC is something that in the event that you do own a home and you do have enough equity in your home, which I'm going to cover in this episode, it's a great way to have revolving access to a line of credit that is relatively inexpensive and will allow you to have quick access to cash in the event that you need it.
A HELOC is a revolving line of credit that allows you to borrow against the equity that you have built up in your home. So your HELOC operates like a credit card. It's not like a loan where you get a lump sum of money; just deposit it into your checking and savings account. Instead. This is access to money you have, the equity in your house that you can draw in small or large installments whenever you need it.
The good news is that you have complete flexibility on how you can use this money. There are no restrictions or regulations. The bad news is that there are no restrictions and regulations on how you can use this money. And the reason why I say that is because this can be a really great thing, but this can also be a really destructive thing, especially if you're not intentional about how you are using this borrowed money.
Don't just take a HELOC against your home to go on a fancy vacation or buy a Range Rover or depreciating assets. Make sure that you are getting access to this money so that you can be strategic with investments as they present themselves to you.
If you're going to borrow money against your home, you're using it wisely and strategically in a way that makes financial sense, not just going out and blowing the money because you have access to more money.
During the draw period, which is the first 10 years, during which you only are required to pay the interest back, I do suggest that you go ahead and make principal payments as well so that you're not stuck with a large principal and interest payment in 10 years when that draw period is up, and you go to that repayment period.