[Rachel]

Has anyone used a HELOC to access funds before retirement?

Considering doing so to bridge the gap between working and selling my house in 3 years.

Appreciate any insight (or warnings)!

[Adam]

Having a HELOC is great idea. Using it is usually not. I would worry that if someone is relying on a HELOC for multiple years to cover living expenses I would argue they aren’t ready for retirement and some other changes need to be made.

How much of your net worth is tied up into your home? Why wait multiple years to sell?

Where are all your current invest able assets?

[Ron]

I haven’t used a HELOC and I’m not sure how easy it is to do in my situation as I have a fully paid off home.

But I have been actively thinking about leveraging equity in my home during retirement. I’m retired now, BTW.

I’m sure the risks, if any, revolve around your full financial picture, your plans and the amounts involved.

Are you paying a mortgage on the home currently?

I’m not sure why folks are saying don’t do it without exploring your full situation.

A lot of people are just debt averse, I guess.

[Rick]

I have used heloc for all manners of things, some common and some not so much.

They don’t really have much in the way of gotchas.

If they are no fee or no closing cost, they often have a clause like “if closed before x months, you owe Y% of them back to the lender”.

I personally discount to near zero any of the “but in 2007-2009 this happened” stuff.

Planning for that level of layers of unlikely events happening again….would keep you from driving or leaving your house or living your life.

If I had a home and was 80%+ likely to sell it in just a few years, I believe I would consider using a heloc as tax free money and I would Roth convert in a big way.

Or as a way to Roth convert a good amount and remain aca subsidy eligible.

But, and it’s a huge one, that is playing fungible money theory because I have the money just in other account types.

If this is instead that you don’t have the money elsewhere….the appeal just dropped by a lot and probably to zero.

[Bill]

In this interest rate environment? We have one in case the market completely tanks, but it’s a last resort if we run out of “safe” money.

[Jeff]

It’s nice to have a line of credit set up based on equity
and
Only pay as used…

there is some annual fee to keep it open.

[Kailyn]

You could look into a reverse mortgage depending on your age. I’m a lender and we do these for our clients who are 62 years or older.

[Author]

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