Why I hate HELOCs, home equity lines of credit.
Yeah, I'm using the word hate. I am definitely using the word hate.
But I don't hate anything so I'm gonna tell you why I hate home equity lines of credit but why
I hate them so you do not make the mistakes that have caused me to hate them let's go.
I'm going to share with you the good, the bad, and the ugly side of HELOC so that you know and you
understand them very well. I'm going to share with you the top 3 reasons that HELOCs are dangerous
and what you should be aware of and last but not least I'm gonna share with you the secret ways
to fall in love with HELOCs so that you can make some money fast. So, let's talk about what a HELOC
is because many of you may not know, I'll quickly explain. A HELOC is a home equity line of credit.
This is where you can take a line of credit against your home. It is very
similar to a mortgage but it is not a fixed amount. So, let me give you a quick example.
Say, you have a house that's worth 100,000 and you do not have any mortgage on that home
at all. You own the home free and clear. You could get a home equity line of credit to access the
equity that you have. Because you do not owe any money on the property, you have equity. Meaning,
you have value. There is a value that is being untapped. There is this intangible value called
equity that you can tap into. And so, what banks will do is they will loan you money against the
equity and you can use it very similar to a credit card or a checking account. They'll give you an
amount. Just using our example of 100,000-dollar home that you own free and clear. They'll probably
lend you 70 or 80 thousand dollars on that property. So now, you have 70 or 80 thousand
dollars that you can use to access to buy whatever it is that you want. You could use it to buy
another property. You could use it to pay your bills. You could use it to pay the taxes on the
home. You could use it to do a renovation on the home. You could do basically whatever it is that
you want it with the money so long as you continue to make the payments and the loan is securitized
by the property. Meaning, you are using your home that you own free and clear as the collateral. So,
again, a home equity line of credit is a type of mortgage, okay? Just being very honest with you.
It is a mortgage, it's a type of mortgage you're borrowing against the equity in a property. Now,
there's different types of home equity lines of credit. Again, I am not here to sell you a
home equity line of credit. You will have to go to your local bank or your mortgage lender to
see if you can qualify for a home equity line of credit. But let me tell you some fun facts
because this is why it matters. HELOCs are awesome if you know what you're doing and they're terrible
if you don't. So, let's get into that part. So, before I get into all of the negative,
like I said, I told you I would give you the good. And there are some really really good things about
home equity lines of credit. Like I said (1), you can tap into the equity in a property. In many
cases, you cannot just tap into the equity. Many people will charge you a lot of money.
They may charge you a very high-interest rate and home equity lines of credit is a very easy way to
tap into the equity. Two, they usually have very low-interest rates. Meaning, they usually will
only charge you 2 or 3 percent. Or they may have what they call a rate plus a margin. Again, not
going to get into this long thing. But again, very similar to a credit card where they have the index
that they're using and then they add a margin to it. So, quick example. Say, the index is 2%
and then they said we're going to charge you a 1% margin then your rate is like 3%, okay? So, just
a quick breakdown. But again, very low-interest rates because what they usually base that HELOCs
on the index that they base it on is usually like the treasury bill or what CDs are going for. So,
right now, the index rate is very low and then the margins are just a little bit higher. So,
you will end up with a very low-interest rate on a HELOC in most cases, okay? The third thing,
you can use HELOCs like a credit card almost. So, like I said in the example, you have $100,000,
they gave you an 80,000-dollar line of credit. Now, you have $80,000, okay? You can do with this
money whatever you want. You can take the whole 80 and just start spending it. Or you can have
access to that 80 and spend it little by little and just make payments. Similar to a credit card.
So, if you have an 80,000-dollar line of credit and you just use $20,000 of it, you only have to
make payments on 20,000. You don't have to make payments on 80,000. Additionally, you would have
$60,000 that you could go back and use for other things. So, it's an amazing way to tap into the
equity. If you don't type into the equity in your property, it's usually just sitting there and you
want to do something with it if you can. Number 4, another awesome benefit of a HELOC is that they
are usually very quick to get. It doesn't usually take months and months to go through the process
of a HELOC. It is not usually the same process as an entire mortgage application or if you're
buying a house for the first time where they're just like running you through the wringer.
Because it is based on the equity in the home and your credit to a certain extent, it's usually a
pretty simple process. Either you'll have a good enough credit score to get it and you have the
equity and it's a quick process to get approved or you don't have enough equity you don't have the
credit scores and you probably won't get approved. But again, in any situation, it is really quick
to get approved and to actually access the money it does not take months and months. So,
it is a fast way to access a quite a bit of money depending on how much equity you have.
And then the best reason and why I'm going to tell you how to fall in love with them is some of the
flexibility. This is also going to be a bad. The flexibility of a HELOC is what makes them kind of
amazing and one of the great benefits. Like I said, you do not have to spend all of the line
of credit. If you want it to use only 20,000 or 30,000 and then go get the other 50 or 60
thousand dollars later, you can. Additionally, it's a lot more money usually than a credit card
so you can access it with just by writing a check or using it as money most people don't see it
any different. You don't have to actually swipe a credit card. In most cases with a HELOC, they give
you a checkbook and you can just write a check and pay anybody using those checks. So, it's amazing.
So, now let's get into why I hate HELOCs because they are pretty hateable if you are not doing the
right things. I told you all those amazing things about HELOCs. And the truth is if you use them
properly, they can be amazing. But here's why I hate them. Here's what most people do with them.
Most people do not get a HELOC and use it to invest in real estate. Most people get a HELOC
and they just spend it. They usually don't even put that money back into the property.
Like I said, I gave you suggestions of what you could do with a home equity line of credit. But
the problem is most people do not. Most people tap into the equity in a property or in real estate
and then they use that money to pay bills. That is a disaster. I'm sorry. I do not suggest you
tapping into your equity to start paying bills especially bills that are going to be recurring
and keep coming back. If you cannot afford your bills or you cannot afford something,
tapping into your equity to pay for it is not going to be the solution. In fact, you're going
to be putting yourself in a much worse situation. And that is what so many people do. There's all of
these ads and commercials where they're telling people to tap into their equity and consolidate
their credit card bills and pay off their debts. And I absolutely hate that idea. I do not think
you should ever do that with your home equity line of credit in like 99% of the cases. What people
do with the money is usually the problem. This is equity, people; home equity line of credit.
This is an intangible thing that you have, equity. Meaning intangible money. Money that is not
in your pocket. And a HELOC will allow you to tap in and grab that equity and turn it into cash.
Now, you have cash. So, what do most people do with cash? They spend it. And that's why I hate
them. You should never take your HELOC and spend it. You either are going to invest it or don't
even touch it. Bottom line. This is why I hate them. People spend the money they don't invest it.
If you're going to take the money and get more real estate, income producing real estate,
not just buy you another house that you're going to live in. That's dead money, don't do that. But
if you're going to buy a rental property you're going to get your first Airbnb or you're going to
renovate a property and then sell it, you know, you're going to take that line of credit
then renovate the property to bring the value up what we call forced appreciation where you're
forcing the value of the property to go up and then sell it and recoup your money and
then pay off that HELOC, absolutely. Do that. That's what I would do. But taking the money,
paying down debts, paying credit cards, paying back taxes, whatever. Anything that's like a bill
especially a reoccurring bill, do not spend your HELOC doing that. Don't fall for it. Don't use
it for debt consolidation. And 99% of the times. Again, there's no absolutes. But in most cases,
that is not what you want to do with your HELOC so don't do it. So, let me tell you now how I
make money with HELOCs. Like I said, I got a home equity line of credit the first time and it was
amazing. And what did I do? I turned that home equity line of credit into rental properties,
okay? I made an entire video that teaches you how to get properties for pennies on the dollar. I'm
not talking about finding a real estate agent and driving around and finding that house,
you know, that's the perfect rental property. I'm talking about targeting people that are having an
issue with their real estate. For example, they're behind on their mortgage payments
and they'll gladly let you take over those payments and get that property from them. Now, you
use your home equity line of credit and not only did you get a house at a discounted price. Now you
have an actual asset, okay? So, if you're going to use your home equity line of credit to buy assets,
then absolutely. That is what I do with a home equity line of credit. Because again, you're
using your equity. This is something you've built up. This is something you've done and you don't
want to just squander that money just because it's not real and someone gave you access to it.
They gave you access to your equity, your money. Invest it wisely. The property that you took the
equity out of is an investment. That's why you're taking the equity out of it. It was an investment
for you. So, the only thing you should do is make more investments. Don't use it to go on vacation,
don't use it to pay off bills. Use it to get more rental properties or possibly fund your business
depending on if you vetted the id and you're really going to make money with it. So, I have
written an entire book that teaches you all of this and more and you can get this book absolutely
free. Go to noellesfreebook.com. That's noelle (n-o-e-l-l-e-s), free (f-r-e-e), book (b-o-o-k),
".com". I have poured my heart into writing this book teaching you exactly how I went from broke
in my parents basement to a multi-millionaire with over 8 streams of revenue right now that makes me
millions of dollars per year. And I am now giving it away to you absolutely free. I want to make
sure that you read this book that is inexpensive and it's a great way for you to get the knowledge
the information and the resources that you need to be successful. This is Noelle. To your success.