[gunfighthacksaw]

What happens when the crash occurs and your bank nixes your line of credit? They are well within their right to, at least it says so in the fine print.

Then you’re broke, and left holding a very baggy looking portfolio.

[Asparagirl]

Yes, people seem to forget that HELOCs are usually callable too.

If you have a $500k HELOC and have used $200k of it for something, the bank usually has the right to force you to start making principal repayments (not just interest), to change the interest rate, and/or even in extreme circumstances to “call” the loan and ask you to repay everything ASAP. Read your fine print.

[gunfighthacksaw]

That said (and this goes counter to my previous comment) I think HELOCs are probably the safest credit source, purely because if the banks started calling them there would be an economic meltdown. Obviously if you’re going to overleverage yourself, a HELOC makes the most sense because of low rates, so I’d assume anyone who is overleveraged is doing it through a HELOC.

However, if you can get a HELOC, you own property and are therefore much better off and less precarious than people who don’t. Ceteris paribus, I’d rather lose my shirt in a house I own rather than a rental.