<p>rundmc,
Personally, I would not want to be in a situation where my front-line source of emergency funding is loans from my HELOC or 401(k). I want an emergency savings cushion, in my name, in the bank, that I can get my hands on without anyone else’s approval – even if it’s earning very little. (Ours is about half in a Vanguard money market, and the balance in a mutual fund and an income-producing utility stock.) If I have to take out <em>loans</em> in an emergency, I’d still have to worry about the cash flow to make loan payments. </p>
<p>But we are also weird in that we fund college mostly through current income (and live very frugally) rather than touching what’s in savings. (DH hates doing Schedule D ;)) Also helps that our mortgage is a low % of our income.</p>
<p>Call me risk averse – but I like to sleep at night.</p>
<p>CD, OK, I get the “conservative” risk averse thing. To each his/her own. I wasn’t recommending a risky strategy though, actually quite conservative in that it’s primary purpose is immediate debt reduction.</p>
<p>However, just to be clear, accessing an ALREADY APPROVED HELOC does NOT require someone else’s approval, as you stated. It works just like a savings account in that you can draw at any time, write checks, move $$$ to your checking account, etc. No approval, no hassles at all. I just can’t see the logic of having $90k earning next to nothing when you owe that amount at 6%, even for four years. And remember, it’s very likely the OP never has to even touch the HELOC for much due to increased cash flow from not having a 1st mortgage.</p>
<p>On a side note, Utility stocks are NOT savings. I don’t know which mutual fund(s) you own, but rarely are they savings. So, that comparison is very different. Yes, maybe I’d want to keep my INVESTMENTS rather than pay off the mortgage, but not SAVINGS. Let’s not confuse the two.</p>
<p>For our purposes, they are savings. We’ve had them for 20+ years and have no intention of cashing them in any time soon. We have liquid stuff we’d pull out first.</p>
<p>There were HELOCs getting closed out by banks a few years ago when the housing market tanked. In any event, my point is that one has to pay back a HELOC – and if one is sufficient straits to tap into it for emergency $$, then one has to figure out how it’s going to be repaid while the emergency may still be going on.</p>
<p>But now back to the OP’s Q…</p>