Thursday, July 18, 2013

Good To Know: Why Everyone Should Have An Home Equity Line Of Credit

Today I attended an online webinar organized by Rich Dad Education. Their speaker was Jeremy Reese.

When he was younger, his parents where not wealthy people but lived comfortably owning their own home. His mother was a photographer and his father would develop them, running a business together. When he was 18 years old, Jeremy was in a motorcycle accident. Which was the cause of him loosing his leg. He was in ICU for 4 months. As where is parents, making difficult life or death decisions fighting for the survival of their son. During that time neither of his parents could work and the business went under. They also ended up loosing their home as they were unable to maintain the mortgage payments.

Now imagine the same situation if they had taken advantage of the equity they where slowly building on their home by having made the regular mortgage payments for years before the accident by having obtain an Home Equity Line Of Credit. Jeremy would still have had his accident and his life would still be in jeopardy. His parents would still have had to stop working and their business would still have gone under. But while they where unable to work, they could have resorted to the line of credit to maintain the payments on their mortgage. Giving them the ability to stay focus on the survival and recovery of their son. Lessening slightly their level of stress in such a horrible situation.



In these days, many peoples retirement plans is suing someone else. It as become a terrible truth to our justice system. Imagine someone is walking their dogs in the middle of a snowy, icy, Canadian winter day; and they slip and fall on the sidewalk in front of your property and they brake their arm. They decide to take advantage of their misfortune by suing you, the home owner. Off they go to their lawyers office and explain the situation. The lawyer seeing dollar signs all over their story approve of their case and decides to look into it closer. So Mr. Lawyer does a quick background check on you, and realize that although yes you do own your own home, there is a large amount against it leaving almost no equity. The dollar signs quickly vanishes and although he would still be willing to take on the case, it will now be at the plaintiff's expenses. Lawyer's are not cheap and the plaintiff may rethink his decision to sue. Even if the Home Equity Line Of Credit as not being used, when the lawyer does his background check it will still show up against the property. If that was not in place, the chances of the law suit taking place would be a lot more likely.



Our society is very scarred of debt. We have been brainwashed to constantly work of getting out of debt. When in fact it should be get out of bad debt and accumulate good debt. While unused, payments of a Home Equity Line Of Credit is $0. You only have to make the payments when it is in use for the amount that is used, and at that point it is interest only. So in Jeremy's case, his parents wouldn't have had to worry about paying off the Line Of Credit until they were back at work when Jeremy was home again.

As an investor, you can simply imagine how having access to this cheap easy money would benefit for closing on deals giving you a little more time later to either refinance or to set up arms length mortgages.

I hope you see the safety possibilities that an Home Equity Line Of Credit can offer. If you do not currently have one in place, I strongly recommend that you consider applying for one soon. Because if the occasion arise that you could need one, you will no longer qualify to obtain one.