If you start from owning your home free and clear, you own 100% of your home, no one is going to have a claim on it. If you own 50%, taking out a loan, with guaranteed requirement to pay interest on the loan, you have your neck stuck out quite a bit ... what did you do with the money? Buy consumer stuff? That way, you're eating now - and paying later ... plus paying fees on the future(?) income not yet received, with no outside income to help cover it. And no extra assets to maybe produce income, maybe grow some. Not my cup of tea. If you use the money to invest, neck stuck out some. You have guaranteed requirement to pay interest on the loan. You have some extra assets, whose value may grow - may shrink. If your investments produce some income, that can pay part of, or even all of the cost of the loan (net of tax considerations). If you plan to take out a mortgage for, say 1/4 of its value, neck stuck out less far ... what do you plan to do with the money? Invest it in a bank account or Money Market instrument, that usually pay at a low rate, to obtain the peace of mind of knowing that you can cover an emergency need? How about taking out a HELOC, say for $20,000. if that's the amount that you'd like available for emergency ... but it may be that there'll be set-up fees. Then not using it till there's an emergency. Will there be fees asociated with letting it lie unused? Plus, how about holding a no-fee regular credit card, planning to use it for immediate emergency, then drawing on the HELOC to pay off the credit card debt before due date, in order to avoid their high interest rates - thus deferring the date at which interest starts on the HELOC, and carrying it at a modest rate? No interest to pay to anyone, or worries about differential rates, until you have an emergency. Interest cost not deductible, though, I expect. If your regular card has a low limit, can you feel comfortable with that until they increase it, as they usually do after a time? If so - there's the HELOC available to draw on immediately (paying interest from that date), or you can take out a second card. *Never* let that/those higher-limit card(s) out of your sight - even to give to waiter at a restaurant, for internet purchases, etc. - carry a card with a very low limit for such uses. If there are (substantial?) fees associated with setting up a HELOC, what about taking a mortgage (comparable set-up fees? deductible interest, for next ninety days - your suggestion?) for, say $50,000., then either investing mainly in quality equities, aiming at leaving the mortgage running for a substantial time, giving a long enough period to allow for the equities to appreciate over time, despite short-term fluctuations. When using the mortgage to purchase income-producing investments, interest is usually deductible, I think - you need to check it. Using a HELOC for investments, you may well be able to arrange to pay interest only on a regular basis, with option to pay down principal as you choose; using a mortgage won't give you that option, so you'll have much higher ongoing payments liability. If you invest in equity-based mutual funds, the market historically has average growth of about 8%, and U.S. mutual fund managers usually charge about 1.5%, I think - about 18% of your anticipated growth rate ... and they get theirs annually, whether the market goes up, down, or sideways. Perhaps buy Exchange Traded Funds, which buy various components of the whole market, but managers charge much lower ongoing fees. Very few fund managers manage to out-perform the market, long term. On the other hand, with about $60,000. to invest in total, you could buy stocks directly, in various market segments, countries, probably 6 - 10 to a dozen or so, more or less building your own mutual fund - and avoiding their substantial ongoing fees (pocketing them instead). And if your rate of appreciation is slightly lower than that of the fund managers - you're not paying their guaranteed fees, either. Use the original $50,000. to buy stocks or equity mutual funds (with some bonds, etc. if you'd feel more comfortable, but those dollars don't grow if left to maturity, and inflation erodes the value of each dollar annually). Using your $50,000. invested using the mortgage/HELOC money in those mutual funds, ETFs, bonds and stocks as underlying security, open an LOC for $20,000.00. I think that you'll find that the lender is willing to lend $50.00 on $100.00 of underlying collateral. I took out a fully secured LOC a few years ago, covered by stock and mutual fund certificates, with no set-up fees. There are no fees associated with carrying it unused, either. You may be able to arrange such - check, of course. Using a LOC for $20,000., should your $48,000.+ (net of commissions) asset, supporting a LOC of up to $24,000.00, drop in value by about 15%, you would still have value to cover your $20,000. LOC if it were fully drawn, but no problem, as it is lying there unused, ready to cover you in case of emergency. However - if there's a further drop in the market (which sometimes happens - up to 25% or so), if your LOC is fully drawn, your lenders are going to want more cash or collateral - like, today, or tomorrow at the latest. That is - *only if* you are using the full amount of your LOC at the time! Otherwise, you're covered in case of a deeper market drop. Suppose you use $10,000. of the LOC to buy more equities, leaving you with only $10,000. unused portion of your LOC? With about $58,000. in assets underlying the LOC, if the market drops by slightly over 25%, you are still covered for the full amount of the LOC - which is usually only drawn to $10,000., except when in use for emergencies. And there is back-up of the credit card(s) that can be used, even if one needs to carry a balance at higher interest rate for a while until there is some free room again in the LOC when markets recover. Those $48,000. - 58,000. in assets will produce some income which you'll need - plus other ongoing money - to cover the costs of the interest and principal on the mortgage and interest on the HELOC (or portion thereof) when in use. As the value of the stocks increase over time, the amount of the dividends will usually increase slowly, resulting in a reduction in the funds required from your ongoing income. Also - the amounts that you are required to repay are precisely the amounts that you borrowed in the first place (apart from the rent on the money). That, so long as inflation is with us (as it has been since the Dirty Thirties) you'll be repaying in deflated-value dollars. The guy/gal who puts his/her money in the bank in guaranteed-value dollars loses to inflation ... while the guy/gal who borrowed them, paying back precisely the amount that s/he borrowed ... gains. At about 2% annual rate, currently, isn't it? Good wishes for making a decision that you're happy with, long term. ole joyful

It'll take a bit of time for all institutions to get around to getting these letters out to everybody with a HELOC. But, sooner or later, everybody's going to get one if they're in a Designated Declining Market. stellar1: "I could max out the line and still be well below what my home is appraised at with the county." What your home is appraised at with the county is probably not relevant. Municipal tax assessments are, in the vast majority of jurisdictions, not representative of fair market value. Assessments are performed on some routine time frame...every 10 years, every 6 years, every 4 years, & a very few reappraise annually (expensive so most munincipalities don't do it frequently). So, depending on which direction the market is moving & when your last assessment was performed there can, and usually is, a large difference. Then, to further complicate the issue...the majority of jurisdictions do not tax on the full market value. The assessed value is usually some percentage of FMV. For example, here in CT it's 70% of FMV. Also, if you read your HELOC documents I'm certain you'll see that your lender has retained the right to pull the line of credit whenever there's a material change & a decrease in the value of the underlying collateral meets the definition of "material change". It's highly unlikely your lender has done anything illegal. Of course you have to pay for the appraisal. It's your loan & your property. I'm glad you got a another loan that meets your needs. Somewhere in the fees and/or rates you are paying for an appraisal for your credit union's use also. Again, it's not the lenders who are driving these HELCO pullbacks. It's the agencies' underwriting. But, the lender is in full agreement because they don't want to have a 110% LTV on a property located in a declining market. /tricia

Hi Parkejo, Or should we just get a higher mortgage and not touch our savings? Then we could pay down the mortgage with extra payments or refinance down the road. What would you do? Definitely DO NOT bury your safety or retirement money into your real estate equity. This is our third house we would be buying. We are putting down about 50% of the sale of the house and financing the rest. We would not have any PMI to worry with. I know the real estate market is a mess right now. I just don't want to tie our emergency savings into our first mortgage that's all. Just wondering what others have done in a temporary situation. Here's the decision criterion; Recognize that real estate equity is a highly risk-vulnerable place to keep your funds you may be counting on for retirement. How much (what percentage) of your total family net worth is represented in your real estate equity? Make sure you are not over-concentrated (under-diversified) by having too much of your funds at risk. Real estate equity gives zero compounded growth, and only benefits you equal to the after-tax simple interest savings of the leverage avoided. Alternatively, you'll have many diversification options that can provide compounding growth in a tax-sheltered treatment, and in some vehicles you can have "principal guarantees" which assure that you cannot actually lose ANY of your original funds regardless, and in some cases they protect your periodic gains as well. Manage carefully. Under-diversifying in a risk-asset to "save" a relatively low mortgage interest rate, at the costs of compounding growth and safety, can be very hazardous to your retirement. Luck! Dave Donhoff Strategic Equity & Leverage Planner

To clarify some things about our ideas to buy on Isle of Palms - while we're going to hold off on buying, and may not ever buy on the island itself, the area around it seems to be exactly what we're looking for our retirement years. The island is less than 13 miles to downtown Charleston, and only 20 miles to the Charleston Int'l airport. Even closer than Charleston is Mount Pleasant, about 4 miles away (across the Inter-coastal waterway and a marsh), which has plenty of shopping, restaurants, medical care including a decent hospital. In addition to wanting to live close to the ocean, we want to live near good medical care (this is most important), shopping (I'm not going to stop doing DIY projects on any home I live in until my body gives out - it's my hobby), airports, etc. I love the beach - every vacation we can we go to a beach - we've visited many of the east coast beaches over the years - I never get tired of it. My husband loves salt water fishing. We have a boat that he takes onto the Chesapeake Bay all the time to fish, and we go tubing on the Potomac River with our grown kids and grand kids (who are still very little). We've planned on retiring to as close to the (right) beach as possible for at least 20 years and I think it's safe to say that we're not going to change our mind about that between now and when we actually retire. And I definitely don't want to ever live someplace rural again - did that as child and have family still there - definitely not for me. Even if we were young I don't want to live in a place where there aren't plenty of doctors, including all types of specialists, and I don't want to live someplace, where if one of us was in the hospital, the other would have to drive over an hour back and forth. I'm honestly surprised at how many people I know who retire who don't care about that aspect at all. So - given what we know we want/need, we've been considering all the areas close to the Atlantic between Wilmington NC and Jacksonville FL. A few years ago we visited every place that even seemed to come close to what we want. But when we were looking before our income and savings were a fair amount less than they are now, and housing costs and interest rates were higher, so it limited where we would be able to afford to buy, so we didn't consider some of the areas we could afford now. And this is a retirement place we're talking about - being able to vacation in it before retirement is a bonus. We could wait until we retire to buy, but as I said in the original post, I don't want to miss an opportunity to buy while the prices are low AND the interest rates are low. But I do think we need to slow down and take our time - visit and stay there during different seasons, including the heavy tourist season, and make sure that it's what we want. We may find that living on an island/beach itself is not that great and that we should go back to what we always considered to be our only option - living on the mainland, but close to the beach. People seem to think that prices will be low for a while - I don't want to buy and then see prices drop even lower - and that interest rates will be low for a while too. So I realize that there is no rush - but I still don't want to kick myself years from now for missing any "deals of the century". I know this was long - sorry about that - but I think my first post gave the impression that the whole idea of buying at/near a beach, and this one in particular, was hurried and not thought out. While rushing into it right now is undoubtedly a bad idea, I don't think the concept of buying a home sometime soon for retirement in a few years, if the prices and interest rates are really low now, is a bad idea.