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2019 Idaho Real Estate Blog

Your home's equity IS your emergency fund! Main Boise Home Loans
What would you do if you lost your job? Had a major medical expense come up? Your home's equity is one of your best lines of defense!

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Dear BuildingCredibility.com reader:

There is an argument that the equity in your home is worth nothing. I don't agree with that 100%, but I can see where financial planners, investment advisors, and other industry professionals come from when making statements like that:

EXAMPLE: You own a home that appraises today for $200K, and you owe $150K on the mortgage, meaning that you have $50K of equity in your home. So, how secure is that equity? Well, with some areas of the country experiencing up to 10% or more losses in the value of  homes, I would agree...that equity is not so secure. If you took a 10% hit to the value of this home, your home's equity would drop by $20K...not very secure!

This may be the time to open a home equity line of credit (HELOC) for an emergency line of defense. Opening a HELOC now makes sense, even if you don't need to borrow the money. A stalling economy usually points to job layoffs, and getting credit or a HELOC with no job is a step away from impossible. If you have little to no equity in your home, or you have a lower credit score, you will have a tough time getting a HELOC...even if you have a strong, stable job.

HOW A HELOC WORKS

With a HELOC, you can borrow any amount of money, up to a specified credit limit, just like a credit card. Generally, you are not penalized if you never borrow against your HELOC, and you will only pay interest on the amount that you do borrow. And, most banks and credit unions charge ZERO fees for opening a HELOC! Where is the risk there?

There are many other benefits to having a HELOC that I see and counsel my clients on because of how the interest is calculated on a HELOC. It is not a month end amortized mortgage like your traditional 15- or 30-year fixed mortgage use. Rather, a HELOC uses a day-end simple interest calculation...remember, you only pay interest on the amount you owe.

For strategies on how to utilize this non-amortized interest calculation to your favor, feel free to call or email me at (208) 880-0316 and eric@ericsloans.com.  You can also visit my website at http://www.ericsloans.com.

Regards,
 
Eric Leigh, Mortgage Loan Officer
1419 N. Midland Boulevard
Nampa, ID 83651
(208) 880-0316
http://www.ericsloans.com
eric@ericsloans.com
 
Posted by Eric Leigh at 3/20/2008 12:31:00 PM
Comments (2)
Re:Your home's equity IS your emergency fund!
OUR COUNTRY IS A JOKE! WTF,,, why can't we save like the rest of the freakin world. We are pathetic materialistic instant gratification machines. YOU SHOULD HAVE 6 MONTHS CASH IN THE BANK FOR EMERGENCIES before you buy a home...

IF YOU ARE A BROKE FOOL WHO's emergency fund is his house you have no financial management skills...

Okay, calming down, ...HELCO can be a back up to the 6 months, but come on AMERICA...we are a subprime nation now...we have sold out our childrens future with our huge personal and government debt loads!

I WANT MY CHILDREN TO LIVE IN THE GREATEST COUNTRY IN THE WORLD...not a leack-F%$%K nation that owes it sole to the arabs and chinese!
Posted by on 3/25/2008 6:08 AM
Re:Your home's equity IS your emergency fund!
Ah....Emdeplam is back! I hadn't heard from you in a while and was sad to see you not blogging. Good to see you back in the game.

I couldn't agree with you more. I think the best position to be in is 3-4 months of cash reserves in a interest bearing liquid account that is not a basic savings account or CD, but rather some vehicle that is earning at least somewhat close to what the rate of inflation is. That being said, in ADDITION to those savings, a HELOC is a great "back-up" (I like how you phrased that) to that savings. Notice I never used the HELOC as a savings substitute, but it is a great source of major emergency funds (hospital trip, etc.).

Oh, and it is our SOULS that we owe, not our shoe soles! :-)

Eric
Posted by Eric Leigh on 3/25/2008 7:44 AM
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