Why You Should Set up a HELOC When You Don't Need It
Updated: Jun 15
Secured Homeowner Lines of Credit (HELOC) have been a popular finance choice for several years due to their relatively low interest rates and their flexibility.
While many people assume that a HELOC is only something you should consider when you need extra cash, the truth is that there are many reasons why you might want to set one up, even if you don't need the money right now.
I am not here to tell what a HELOC does, but why you may want to consider getting one in place if you have the equity in your home when you have NO plans or need to use it.
A Client Story
Recently, a good friend had to take close to three months off work for a severe back injury. She is a professional who is self-employed and very responsible with savings and debt. A year or so ago, we had set up a secured line of credit for this couple for the possibility of a lot purchase in BC.
Nothing concrete, but just a future dream that they wanted to be able to execute quickly if and when the time came.
Fast forward a couple years to a few days before Christmas when a nagging injury came back in full force. With no advance warning, she was hospitalized and unable to work or walk, for that matter.
Health issues are stressful enough, but worrying about depleting your savings to pay for health crisis is daunting.
This line of credit gave my client the ability to put their health first and receive treatment that will be a game charger for her life going forward. In her words:
“having this line available allowed me to access private medical care without delay. This meant I could prioritize my health over all other matters during a very stressful time. As a result, I was able to accelerate my return to work.”
And because the credit is revolving, you can keep using it as needed, making interest-only payments until full payments can be made.
When you are self-employed, disability insurance is often expensive and pre-existing conditions may prohibit approval of a policy or result in a denied claim.
Getting a HELOC Before Something Happens
A HELOC can be a valuable backup plan if your financial situation changes unexpectedly. Having a HELOC strategy in place can provide financial stability while you get back on your feet.
You don't have to use the funds right away, but it's reassuring to know that you have a safety net in case you need it.
But, trying to get a HELOC when you are off work, can be difficult and as lenders want to confirm current income. Disability income is used on a case-by-case basis.
Being proactive, when you don’t need the line of credit can save you time and stress for when you may need it.
If you’d like to discuss setting up a HELOC, please send me an email and I’d be happy to help.
PS. I know Canmore is a small town and you may know this wonderful person as well. I did receive permission to share this story