I get a lot of snail mail spam from my mortgage company letting me know I am approved for a HELOC. I also get spam now from Bank of America, who bought out my credit card company, letting me know I am eligible for a loan from them.
These companies suggest I take out loans to:
Do home repairs/rennovations
Pay off higher interest loans
Take my dream vacation
What what what? Take out a $15k loan against my house just to go on vacation??
In my mind, “dream vacations” are something you only do when you’ve saved up enough cash to do it. Perhaps it involves some scrimping and saving, and then some charges on the credit card after-the-fact. But taking out a HELOC for that? woah.
How much does a “dream vacation” cost, anyway?
Am I really prude about money or does this seem like a way to get gullible Americans who are already in debt more in debt?
$15k would last for at least a month in most vacation spots that don’t have slot machines. If you can afford to take a month off work, you better be wealthy enough that you don’t need to take out a HELOC.
At least with home renovation you’re building or insuring some equity. Paying off a higher interest rate also involves the prospect of making positive financial headway. But vacationing on borrowed money, especially in dream (grand) style?I’d be impossible to enjoy myself.
Sounds like a really ill advised suggestion to me but for some, hey, whatever floats their boat.
But, then again, I’m expecting to be dragged off to Guantanamo any day now for un-American activities. My credit card company will probably turn me in for telling them, when they called and offered a “really good rate on balance transfers”, that I didn’t have any other debts that I might transfer onto my credit card. Either that, or the guy I was talking to was wondering whether, when I got struck by lightning for lying, if the lightning could travel through the phone lines from California to India.
I would, have and will again take money from my house to go on vacation. It is all in the way you look at the dwelling in which you live. I think of it as an investment and if I choose to take out some profits of that investment to enjoy my life, than I will do that with no guilt or second thought.
Maxing out a HELOC for a vacation would be nuts beyond belief, but using your HELOC as it’s designed, which is a lower interest alternative to credit cards is not so bad. How many people would charge a dream vacation at 12% to a Mastercard or Visa but not want to do it against their homes for 6%?
If you can’t afford the vacation, you can’t afford the vacation with interest…
(There are cash flow considerations at work as well - we’ve been known to float on our HELOC because we don’t want to cash in stock until we get to long term capital gains, or because we think the market is temporarily down, or because there is a five figure check arriving in a month or two - but I doubt these things are targeted to people palying cash flow games for tax purposes).
We have a live one. You don’t have any “profit” whatsoever from your house until you sell it and get a check for the difference between your mortgage and the sale price. A loan against your home is still just a loan like any other and you have to pay the money back with interest. The fact that it is attached to your house just means that the mortgage company will be all set even if you don’t voluntarily pay it back. It has nothing to do your home from your end really. A similar loan rate from another source gets you the same result and it is partying on credit which is usually frowned upon.
Some of those of us who wouldn’t take out a loan against a home to take a vacation also pay off our credit card bills every month and wouldn’t make an exception to that policy for a vacation. So we wouldn’t be paying interest at all, unless we took cash advances on the credit cards during the vacation (and why would we do that- that’s what ATM cards are for).
I might under certain instances like if I was expecting a life changing buttload of money on a certain day (i.e lotto winnings) and wanted to vacation before it is paid, or maybe if I knew I was going to die in a few weeks and my heirs would have to worry about repayment.
Other then that, no
I agree with Shagnasty Foxy40 You are just taking out a loan for a vacation, nothing more or less. The mortgage part is just a hold on your assets till that loan is repaid. Now that hold will get you favorable rates and if you are going to take out a loan it may as well be at the best rate you can get.
Now what you are doing is speculating on the profit that you might make on the sale of your house, and deciding to take out a loan based on that, but again you will have to sell that house (or subdivide) to get any profit out of it at all.
I wouldn’t, but I don’t know that I’d begrudge someone else their enjoyment. I know people who have gone out West for a month, and paid for their grown children and grandchildren to come for part of the time, or invited the whole family to Hawaii for a week(to celebrate a 50th wedding anniversary)*. Something like that, intended to be a once in a lifetime experience, I’m not sure I’d blame them for taking out a loan, especially if they knew where the money was coming from to pay it off.
*Not that it matters, but the people I know who have done things like that–to the best of my knowledge–could in fact afford it without going into debt.
I would say it’s acceptable to go into debt to buy a car if and only if you need a car and the alternative is no car or a car that would not reliably get you from point A to point B. Given a choice between no debt and a smaller, less fancy, and perhaps older car, and going into debt to get a big shiny new car, I’ll pick the smaller car and no debt. I actually did this- I wrote a check for my car. My car is probably in the bottom 5% of cars in my apartment building’s parking garage ranked by cost, but I don’t have to make car payments.
If I came into some money I might use it to have a vacation instead of paying off the mortgage, but I definitely wouldn’t take out a loan. If I have to take out a loan it means money is tighter than I’d like, and if money is tight then I’m sure as hell not going on vacation.
I’ve heard people (always women) suggest that we take out a loan to have our dream wedding. Geez.
Fair enough, I know many people feel this way. I personally don’t have a problem amortizing a vacation. I’m going to Vegas in January. It’s a group thing with a group of good friends and I’m able to say “Yes” to going without having to have 8 months advance notice in order to save up to pay cash. I’ll pay back the same $150 to $200 a month that I would have had to sock away, but just be paying it in arrears, plus a low interest rate for the conveniance.
That’s what credit is for in my opinion, and a HELOC is just a better financed line of credit. As always, and quite obviously in this case, YMMV.