DVC and HELOC

[Opie100]

We have enough cash reserves to pay down the points we are buying, but under what circumstances should we look into opening a HELOC instead?

 

[OKW Lover]

Heloc?

 

[YourEveryDayAdam]

HELOC = Home Equity Line of Credit.

To the OP: You really should think very hard about taking out a loan against your house to pay for DVC. If times get tough, you can always not pay your loan to Disney and all they can do is take away your points. If you can't pay your HELOC that you used to pay for your points, they come after your house.

 

[ssawka]

As YourEveryDayAdam said, you should only consider a HELOC if you are absolutely sure you will be able to pay it off in a short period of time. That being said, IMHO you should only pay cash if you will still have at least 6-10 months of cash reserves.

 

[work2play]

Although I had the cash to buy my points, my credit union was offering HELOCs at prime (3.25%). I decided to put my points on my Disney VISA card (6 months free financing) and then may move it to the HELOC if rates remain this low. If you have a better usage for the cash, or can get a better return, I would consider a HELOC.

 

[toniosmom]

I used my HELOC for my initial investment in order to take advantage of the significantly lower interest rate. I agree....it's a bit of a risk. However, I have enough cash in the bank to pay the Disney part off, but with the way things are right now, I didn't want to leave myself cash-poor. If you have a good 8 months of expenses in a cash emergency account, then I don't see why you can't go with the HELOC.

Make the decision that is best for you. Regardless of which way you go, the interest is tax deductible.

 

[silmarg]

I think a HELOC is a way better option over Disney financing.

The Disney rate is crazy high.

I agree that HELOC technically puts your home at risk... but most HELOCs allow for interest only payments for the first several years - if needed.

That said, HELOC users must be disciplined with their finances as its easy to be tempted to pay the interest only.

I used my HELOC (at 2.49% now) to pay off my first mortgage. While I am still paying the same amount per month as when I had my 5.5% fixed and will pay off the mortgage much quicker (as now t I am paying $300/mo more towards principal vs before even though I am cutting the same check as always).

If I buy DVC I will either do cash... or HELOC...

 

[Opie100]

I'm buying resale so it's either HELOC or cash. I could pay cash now, and apply for a HELOC later if needed. Or, I could get the HELOC now and hang on to the cash. I'll have about 5-6 mos of cash reserves if I use the cash. I wonder if it would be harder to get the HELOC (or SHELOC as my credit union calls it) after buying the DVC points with cash...

 

[rstamm]

We also did a HELOC, we got it at 3%, as long as you have a plan to be able to pay it back, its a great way to go.

 

[silmarg]

I'm buying resale so it's either HELOC or cash. I could pay cash now, and apply for a HELOC later if needed. Or, I could get the HELOC now and hang on to the cash. I'll have about 5-6 mos of cash reserves if I use the cash. I wonder if it would be harder to get the HELOC (or SHELOC as my credit union calls it) after buying the DVC points with cash...

I recommend that folks who have alot of equity (and are good with money - meaning wont tap the HELOC to pay ordinary expenses) should have a HELOC even if they dont need it for a particular purchase. It gives you flexibility (if needed).

I view HELOCs as a form of "financial disaster" insurance. For example, lets say you hit a real rough patch financially... you could use the HELOC to pay the first mortgage payment each month and actually delay a foreclosure. A HELOC could also be used as a supplimental rainy day fund - after your real rainy day fund is emptied.

Most HELOCs have zero closing costs. So in my eyes there is no reason to not get one (assuming the HELOC checks dont burn a hole in your pocket).

 

[Opie100]

My credit union offers particularly low rates (2.25% or so) but requires the buyer to pay closing costs ($1500-2000). What closing costs have y'all been paying on your HELOCS/SHELOCS?

 

[rstamm]

My credit union offers particularly low rates (2.25% or so) but requires the buyer to pay closing costs ($1500-2000). What closing costs have y'all been paying on your HELOCS/SHELOCS?

I didn't pay any costs, most that I have looked at had no costs.
You got a great rate but that was a lot of money down to get it.

 

[Opie100]

I didn't pay any costs, most that I have looked at had no costs.
You got a great rate but that was a lot of money down to get it.

Yeah, I'm going to turn it down for something else - did you use a national bank or a credit union? 3% and nothing down sounds good to me.

 

[rstamm]

We used Northwest Bank in PA.

I would check around your local banks and see what they can offer.

 

[BWV Dreamin]

In these economic times, I would advise against a HELOC. 3-4 years ago, not such a bad idea. Housing values are depreciating, and thus the equity tied to it. Jobs are not secure, and we will be reaching double digit unemployement soon. I would go thru Disney. This way the loan is not tied to your house, and should unforseen things happen, your house will not be affected should you default. Interest rates are not an issue if you plan to pay it back within 2-3 yrs.

 

[Opie100]

In my case I'm buying resale, so financing through Disney is not an option. But I appreciate the input.

 

[jmerkel]

you should be careful with HELOCs. Most are adjustable rate, meaning the rate will most likely go up, not down considering the low starting point. Just something to consider. Whats nice about the HELOC is that you can take the interest as a tax deduction....if thats appropriate. I've seen some people take a HELOC for tax reasons and find they don't qualify for deduction in the first place. if you review your finances careflly, can accept potential downfalls if they occur, and feel comfortable...the decision is sound.

 

[BWV Dreamin]

In my case I'm buying resale, so financing through Disney is not an option. But I appreciate the input.

Many resales companies also offer financing. The interest write off thru a HELOC is neglible and not worth the risk associated with this type of financing.