Here’s some advice you don’t hear every day. Contrary to what has always been suggested, some financial experts are telling HELOC borrowers to hold off on paying back their lines.

Liz Pulliam Weston of the Los Angeles Times explains:

“If you’re convinced you’re on track there and you don’t have any credit card debt, the next step normally would be paying down that home equity line. In today’s environment, however, you might find your lender lowering your limit as soon as you start to reduce your balance. Rather than freeing up credit that you could use again in an emergency, paying down your HELOC may actually reduce your overall financial flexibility…

If your loans total more than 60%, however, or if housing values are falling fast in your area, consider instead building up your savings.”

Generally, I’d say that building up your savings instead of paying back an interest-accruing debt an awful idea. But, in today’s market it actually makes sense. Holding on to the ability to have a HELOC is a smart choice for a lot of borrowers facing financial instability. Plus, by placing unused HELOC funds into a high-interest savings account, much of the loss can be mitigated.

See Also:

How to Un-Freeze Your HELOC

Countrywide Freezes More Home Equity Lines

Tags | Heloc, heloc crisis, heloc freeze, home equity line of credit