Why Not Take Out A HELOC Instead of Buying A New Home?
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- čas přidán 24. 03. 2022
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This was a great question. Something different from the same "easy" questions about getting out of debt!
Even if you upgrade your home, the equity from the old home should be rolled into the new house, not cashed out. That’s the difference. You’re still maintaining your equity whereas with a heloc you are spending your equity.
While I agree with your overall point- Selling a home and buying a new home actually waste 30-40k (based on avg 400k home) in equity. There is alot of cost to sell.
Having the patience to wait and pay cash is the most difficult thing for most Americans. Seems to be a cultural flaw created by the banks.
And WHO control the banks? Hmm... 🧐
Created by our lack of self-control and unwillingness to delay gratification.
We as a society are extremely impatient. I understand wanting stuff now, but getting into debt for it isn't worth it. I've always been good with money (no cc debt), but always thought a car loan was something I'd always have. Now that I'm completely debt free (except my house), I'll never go back into debt for anything. Be patient, save up the money, and then buy what you want. Not having payments is so freeing!
@speeddemon0712 Agreed. I have a paid off car and it feels great. 36k left on my mortgage and I can't wait to get that paid off too!
Sure wait and wait and wait to pay cash and never enjoy it.
Never put your home at risk for a new kitchen or a one week vacation...
👍🏿
Amen 🙏 mark. You hit the nail on the head brother. I swore once my wife and I paid our mortgage and home equity loan off that we would never get into that kind of debt again. I’m in the same shoes now, I’m tempted to get another heloc to have home improvements done but I don’t want to get in debt again ever. It’s not worth it. Just to sit in my own house and know that it’s paid for and can’t be taken from us is piece of mind. (Other than taxes but there’s no way out of that). Both of my cars are older 2010-2011 but both are paid off and well maintained garage kept with lower miles. Would I like to get all this stuff done and new? Hell yes but I’d have to pay all the money back and I’m pushing 50 on a fixed pension now for the last 3 years. We were in so much debt before that I am terrified of it.
The only time I ever considered taking out a HELOC was when I had to move for a job and had equity in my current house, and I wanted to use that equity as a down payment on the new house but was unsure if my current house would sell before I needed to pay for the new one.
Obviously once my old house sold the proceeds of the sale would go to paying the HELOC off, the borrowed money being used to lower the mortgage on the second.
Luckily it did sell on the day before I was going to sign the HELOC, unnecessary expense and hassle avoided.
Using debt for cash flow, smart!
That's a show on HGTV love it or list it where homeowners have improvements done to their house while looking for a new house . The shows players say for the most part the price to do the remodel and a purchase of another home is basically the same but the homeowners have to decide to keep the newly remodeled house or take the new house . Now you can do many things for 70 grand and it doesn't have to be an addition . You can remodel a kitchen ,new flooring ,landscape the outside and maybe finish a basement . The list is endless . So the guy has a point especially if you gain equity from the improvements .
Solid information Dave thank you.
That Ken guy was the best part of that segment. Love to hear what else he has to say
Good contribution, Kenneth! Dave has trained you well.
XD
I enjoy listening to Ken on his own show. But when he's next to Dave, he's a housebroken puppy.
Hahahahha
Love this advise
May house needs a roof, AC & gas water heater installed. I am going to put the cash for it all in a CD and use the interest to make the minimum payment as it also grows and generates some money while I charge these things to credit cards I have that allow O% no interest for 18-24 months. It is how I have paid for large expenses and even cars. I pay it all off at the end and have for over 30 years. Not taking a loan at all, but leveraging my credit the smart way
Dave Ramsey: "Take debt off the table."
That makes sense. If you want something, and debt is not an option, it forces your mind to focus on increasing income. Debt is the easier option but it's not the best option. If it's not an option at all, it forces us to focus.
Very good question bc I’ve always wondered
HELOCs have good utility. Most people abuse them. I’ve used them to buy multiple properties and assets. If your calling Dave Ramsey your not ready for that kind of move.
100%!
That's the gist I'm getting, I'm still very green but I can only see the upside to utilizing this strategy THE RIGHT WAY. Rich people borrow... They just borrow intelligently. They leverage other people's money. I wouldn't use a HELOC to upgrade my kitchen, but I would use it to replace my mortgage.
@@matthewboone8406 why? The interest rates are higher on a HELOC..
A non Dave Ramsey answer to this would be there is a big difference between upgrading and a HELOC from a cash flow standpoint. A HELOC is a whole second additional payment over a short number of years, a mortgage is spread out over 15 or 30. HELOC likely has a noticeably worse rate too. Both have their benefits and disadvantages.
Dave not addressing the question because he knows he's caught in a logic trap.
Assume person owns house valued at $300K with mortgage balance of $100K.
Scenario A: sell house, use equity to buy new house for $500K with $300K mortgage. This is Ramsey-approved!
Scenario B: keep house, take HELOC for $100K to build an addition. Total house debt is now $200K. This is NOT Ramsey-approved!
Scenario A is not ramsey approved. He even said it in this video. His method is no mortgage at all.
Because it's not a logic problem it's a behavior problem.
@@ashastings92 It is definitely Ramsey approved. He's totally fine with people getting mortgages to upgrade to a new property, as long as the housing payments fits within his formula of less than 25% of take-home pay on a 15-year fixed rate mortgage.
A big difference is that with Scenario B, that 100k addition almost never adds an additional 100k of value to the home.
@@jesusbowls it is Not Ramsey's approved scenario. He says buy your first home with a 15 year fixed mortgage, if you can, pay the mortgage early, then while you have your first house paid off, start saving to buy your 2nd, 3rd, etc. Home in Cash!
Debt is like alcohol it can ruin some people's life and must people think they can handle it untill they can't, less alcohol and less debt is always better in you life ,and some people quit for life I keep but at minimum.
And others know how to consume alcohol responsibly and don't look at all drinking through a lense of an AA meeting. Not all debt is bad debt.
I love how Dave pushes that button really quickly to cut people off, he looooves listening to his voice
Plus the Comps have to make sense to even think about the Equity Loan.
Im sorry, but if you wait to buy everything in cash, youll never get anywhere on an average like 60k salary with a family etc. His advice just sounds good, but isnt real life. I work for a billionaire who leverages debt in order to achieve wealth. He would be nothing without it.
Great ? N even better answer🙏🏿
we have to take debt off the table!
This way of thinking seems unrealistic for 90% of people. Not enough means.
what about using a heloc to buy rental property?
Clearly, you haven't watched or listened to his show, NO!!!!! ABSOLUTELY NOT!
Dumbest thing I have ever seen lately is advertisements advising people to take out a HELOC to fund retirement.
They were pushing that hard in the 90s.
Never made sense to me. Cash cow for the banks I guess.
Who has money to pay cash for a home. The point of moving is moving up in home. Why would you move then if not moving up in home?
Cash flow 70 thousand in two years. Ok Dave.
Considering the home is probably 400k or more they most likely are high income.
It's totally doable ! If they are living within their means of course
He is so out of touch. Yeah just save 35k a year. Me and the wife have no debt but the house and still it would be hard to save that much in two years. It can be done but at the cost of pausing your life with kids for two years for a new kitchen and bath seems insane and unrealistic for most people.
@@engage2895 You’re living in the real world. Finally someone who understands.
@@blessedwifeandmamaDo you have any life experience. Or are you a little kid.
Good morning guys!
Morning!
He said he had that amount it Equity not that he was going to use the entire thing.
Wait... When did Anthony O'Neal leave? Where is he now!?
He has his own show now on CZcams.
Dave didn't even answer the question...
He did - he said don't take out the debt - cash flow the renovations.
@@linuxsurfer2002 lol.. I heard him say that. That wasn't the question
seems like some people forget Dave is teaching Financial Peace and Financial Peace is not attainable with debt
dave approves of home loans at fifteen year fixed. there's no difference between that and this, which is what the caller was trying to get at.
@@FatMenace Dave does not approve of those, he just understands buying a house with cash is not doable for most, and his guidelines for a mortgage, at least i think so, fall into the "best of bad options" category. and there is a huge difference between a 15 year fixed rate mortgage where the monthly payment is no more than 1/4 of your take home pay, and a HELOC
I never like when Dr. John pushes that nonsense theory.
Where is Anthony
Hi I have a question for Dave how can I submit my question?
@@mommymilestones thanks Dave 😄
When your making 50000 a year how long will it take
just go make more money. duh. that simple.
Why don't ya use that 40 million to start your own NO FICO mortgage lending company! Put your money where your mouth is! So many i know that accumulate millions don't do anything with it
I’m having a car fever right now, I want to buy a car I can’t afford.
A want to buy a Tesla Model Y.
Why a model Y?
That's cool, when I was a little kid I wanted a Lamborghini and couldn't afford it either.
You are human, we have been programmed to want the next thing. I get it and also struggle. It becomes an obsession, like getting your next fix, but just like drugs, never satisfies. Learning how to adjust my frame changed my life. I changed my obsession to getting out of debt and once that was done I switched it to increasing my net worth. It is easier than it may sound and now I no longer have to work. I also started reading (listening to the audio version) books that successful people enjoy. Two of my all time favorite: "The richest man in Babylon", available free on utube and "How to fail at almost everything and still win".
Be an Adult
My car had a fever one time
I drained the flicker flacker
Then proceeded to install a new
Bio-tilt spectrum flange substitute
After that topped off the fluids and
It ran just fine. Fever reduced and proceeded down the road with mild sweating convulsions and minor hiccups.
Made it to the destination with no further problems 👍....I couldn't resist I had to lol 😅👍
Take debt off the table....always!
Debt is a tool. If no self control or plan and abused it is bad - like a knife with a baby (bad) or a chef (good).
Then take debt off the table with mortgage too, why not?
@@sami-9233 Exactly. Dave makes exceptions to his rules for a what he likes, makes zero sense since they are real big ticket problem spots: mortgages, kids and expecting babies.
@@sami-9233 Because Dave knows that the vast majority of people would not be able to pay cash for a home, so even though it's not what he would do, he knows that many others have to get a mortgage if they want to be able to get a house. He would actually "prefer" if people could pay cash for a house though, and recommends buying rental properties to rent out to others with cash only.
you signing away your equity while banks are signing away the risk
What happened to AO was he fired?
No he left the show to start his own show on CZcams.
How can ever afford a home 🏡! The American 🇺🇸 dream 💭 is dead 💀
This guy failed the master's class
Take the HELOC, get another home. Do a lease option with a tenant, which transfers responsibility of a landlord to the tenant and they plan to buy (rent to own), and guy can cash flow more than just the mortgage. Tell me how that isn't the fastest way to build wealth? It's called leverage and it does work if done right. Dave just hates debt because he tried he, didn't do it the right way, had an uncommon situation of the bank getting sold and calling the notes.... then he gave up.
Cash flow more than just the mortgage?
Name a multi millionaire businessman who’s never borrowed $ ?
A gradge
This guy is supposedly a "master" trainer and he doesn't understand the pitfalls of HELOCs? 😳
Yes. Please explain what is wrong?
He didnt even understand the question correctly.. He just said he had 70 in Home Equity not that he was using that as Home Equity in its entirety.
70k is a half gut of an average house. "never heard of a 70k bill" lol dave never worked with a contractor before? this channel.
Contractor still deals in payment options...which STILL makes that a bill.
Typically, the HELOC has higher interest than a first mortgage.
The main idea of the Ramsey plan is::: GET OUT OF DEBT.
Don't add more.
Clear debt ASAP. SAVE for improving the house or buying a different one.
Debt is a tool. You can use debt to get rich or to look rich.
HELOC stand for home equity loan
No such thing as debt free unless you live in a cave
HELOCs are simply a financial tool, nothing more, nothing less. There are some inherent limitations to their use as well as advantages of having them. You're going to have a higher interest rate associated with a HELOC as compared to a traditional mortgage and the interest rates are typically variable.
The caller did not say they were going to use the entire $70k equity on a project, but rather, they had $70k equity that they could tap into via a HELOC to finance improvements to their home. There are also many reasons people upgrade their home instead of simply "finding a new home" as Dave suggested.
Even if you are a CPA, I’m sure you understand that going into debt to finance something is against the Ramsey way
So because Dave couldn't handle his debt he now pushes this narrative onto the country smh Get your stuff together Davey
He's right, troll.
@@jimroscovius You need to grow up if you can't handle debt Jimmy
He's worth over 200 million now, mate
@@sXePunkV2 supposedly