HELOC Home Equity Line of Credit

Boulder Housing Market Enjoys Strong Sellers Market

You have likely seen the headlines.  Chatted with neighbors.  Heard about it at bbq’s and likely received a note or two from Realtors.  Boulder is in the midst of one of the strongest sellers markets in history. 

And as a result, home values are up.  Across the board.  In Boulder and Longmont, Lafayette and really just about every part of Boulder County is doing great.  Which makes the HELOC home equity line of credit both tempting and dangerous.  So use it with care.

What is a HELOC Home Equity Line of Credit

This refers to a line of credit, cash out refinance or new mortgage on your residence wherein you take some of the equity out of the property, ostensibly to make repairs on your house or address an important cash shortfall.  Be cautious.  Your home can be your greatest source of savings. 

Try to keep it that way, saving for the future. If you must truly dip into your equity, here are five commonly heard reasons to do so.  Not all are all that great.

  1. bob gordon and the alumni board for ohio wesleyan university
    Here I am (far left, back row for tall people) participating in an Alumni Board meeting for Ohio Wesleyan University.  College is one possible reason to tap into your equity position.

    College.  Improving your education is always a good idea.  It might be a graduate level program to increase your skill set and income opportunity.  It could be a good option to help a child go to college.  Keep in mind HELOC home equity line of credit might not be the most competitive financing option.  So compare it to student loans.  And remember, if you default on a student loan, it merely impacts your credit.  Defaulting on your mortgage could cost you your house!

  2. ATM.  Avoid this one if at all possible.  One of the worst uses of your established line of credit is purchasing toys – boats, sports cars, televisions or computers.  In the moment, it seems like a grand idea.  But financing your lifestyle at the expense of your hard earned equity is a bad idea.
  3. Home Improvements.  The longer you can stay in your house, the more value to you.  Sometimes, staying longer means making changes.  A HELOC home equity line of credit can be an excellent tool to make the changes to your house you’ve always dreamed of. If you are thinking of selling one day, keep more neutral colors and finishes in mind as you do the remodel, to best recapture your investment costs.
  4. Invest.  Using your equity to invest in another home or on a hot stock can be a good strategy.  Just remember, you are borrowing against your home.  If your investment fails, you still need to pay back your borrowed money.  It can be tough paying twice for the same mortgage note on a house.
  5. Moving your debt from several high interest rate credit cards to one lower interest rate payment sounds great.  But will you truly hold to the new budget? Before taking this route, consider cancelling your existing credit cards or cutting them up.  The worst would be using a HELOC home equity line to smush your debt into one lower payment, and then slowly (or quickly) recharge your cards.

It’s a housing market boom for owners.  Avoid the temptation to cash out on our house now while things are so good.  If you can resist the urge, you’ll have great savings for the future, be that a new house or a paid off mortgage one day.

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