If you’re concerned about the upcoming
recession and what it will do to your HELOC and your concern and your word
well stick around because I’m going to share some practical tips as well as
some awareness as to what you can do to shield yourself and your HELOC during recession hey what’s up you guys this is Sam Kwak here one of the Kwak
Brothers real estate investor and chances are you may have watched my video on how
to pay off your mortgage within five to seven years on average without ever
having to add more money or cut back on your expenses and by now you know you
have to get a HELOC but you’re concerned because you sense a recession coming
along and you’re wondering well I don’t know if I want to heal off because
there’s a recession and you know I’ve heard of horror stories back in 2008 and
2009 of people losing their homes and their he locks being shut down and you
know I don’t know if I want to get into that situation like we saw in 2008 this
is something I get a lot quite frankly and I have to make sure that I dress
this for all of you guys and how to properly prepare for an upcoming
recession even if there is now I do believe that recession is coming and the
best way to prepare for that is hit the like button I’m just kidding but do you
hit the like button and turn that like button blue because it helps a lot of
people out there get prepared for a possible upcoming recession so let’s
dive right in but before we do we have to set the stage as to what actually
happened in 2008 and why are people so concerned and worried well back in 2005
through 2007 which is where we really saw the ramp up of this crazy madness of
this financial to set a disaster we saw in 2008 well what happened between 2005
to 2007 was that the banks were getting super lenient they were I mean they were
pretty much careless as far as who they were giving their mortgage to so people
who didn’t have the best credit score people who didn’t have the best income
or the best documents or they didn’t even have a job people were getting
mortgages now here’s the crazier parting and I draw this out for you guys in this
amazing screen here people were going out there and getting their mortgage and
keep in mind people didn’t quite deserve to get a mortgage with the financial
situation but they were giving getting in anyways so they were getting a
mortgage with eighty percent loan to value meaning that
your home is worth $100,000 the banks were giving you and finding you 80% of
the $100,000 Valley meeting $80,000 loan so people had to come up with 20% down
right and we thought that was going to deter some people buying homes well
think again banks got creative they said you know what if you can’t afford that
20% down we’ll lend you that 20% down and so what ended up happening was they
were getting another mortgage on top of the 8% loan and of course the banks were
providing at 20% down on alone which of course today we look back this is crazy
obviously $100,000 value home $100,000 debt right 100% maxed out which is not
good now we we think that this is crazy well think again banks are getting even
more crazier the Bing said you know what on top of that we’re gonna give you a
bonus and we’re gonna give you a HELOC on top of that and keep in mind guys the
concept of HELOC was relatively new I know I know it’s been around for about
20 to 30 years but at that point it was still relatively new and people really
didn’t know what that was so they were like okay exact room extra money we’ll
take it come on bring it over right so not only a banks were give me the 80
percent loan to value they were giving you a second position mortgage and a
third position HELOC which first second and third this is a terrible mess so one
that happening was that people were banking on the fact that their home will
probably be end up being not only hundred thousand but it will be one
hundred twenty thousand dollars next year right people were sort of gambling
they were saying yeah you know if my home was worth eighty thousand dollars
last year it’s not worth hundred thousand well next year by logic it’s
gonna be 120 thousand dollars and that’s what people were banking on they were
like oh man the value of the home is gonna go up so it’s okay I can get I can
get any more debt I’ll catch up well that’s that’s the fallacy that we
fell in so after 2008 the home value just tanked and dropped depending on
where you were it just you know it felt like a rock let’s say this hundred
thousand dollar value home okay now after the recession is $80,000 well
guess what you owe hundred thousand dollars plus any portion that you use on
the HELOC but your home value is $80,000 so effectively you owe more than what
your home value actually is and the problem with the he’ll out goes people
weren’t using the helots to pay off their more
which guess what they’re doing they’re going out Vegas or buying a new vote or
buying a new car they’re doing some stupid ridiculous things and that’s the
problem and this is why Dave Ramsey is so against he locks because that’s what
people were doing they weren’t disciplined they weren’t using our
strategy they were going out there and jacking their loan up to 100 percent
hundred twenty percent of the actual home value and that was the issue we saw
2008 now we can go deeper and go into the detail as to what actually calls
2008 but let’s look at the consequences right most people saw this major drop in
their home value so this is where the fear comes from people lost their key
locks and people lost their homes they couldn’t pay their mortgages they
couldn’t pay their second mortgage and this it got really bad and things were
freezing or shutting down the he last completely because of the you know the
home value dropped so steeply and things were taken away he laughs so this is
this is the fear now here’s how to prepare for the next recession and what
to actually do with the HELOC and for those who don’t know our strategy on how
to pay off your mortgage within five to seven years on average we accomplish
that through using a HELOC and if you guys are wondering oh I need some more
explanation on this well go and click on this video right now BAM there it is
click on that video it’s a 25 minute explanation video on how to pay off your
mortgage within five to seven years without adding more money or without
cutting back on your expenses now if you enjoy this video so far again just a
reminder go and hit the like button as well as subscribe to our youtube channel
for more awesome information moving forward you know I do believe that there
is gonna be a recession coming soon we’re due for a recession it’s gonna
happen who knows it’s already happening right now but we just haven’t felt it
all the way yet so here’s my recommendation or at least my opinion
okay I don’t give any financial advice it’s just opinion my opinion is that
keep your debt level below 70% meaning if you have a home value of $100,000
keep your debt level within 70,000 or less right preferably less right we
don’t want we don’t want to be in too much debt and that also includes
combined debt so if you have a mortgage and a HELOC make sure you go below 70%
now if you’re over 70% let’s say you’re a 90 percent debt compared to
your total home value our strategy is probably going to be the best quote
unquote weapon to get you down to 70% as fast as possible of course this is a
cheat by not getting into more debt we don’t want to buy a new car we don’t buy
it you don’t want to buy a boat alright those are terrible things to buy fun but
not the best financial decision that you’ll make make sure you stay below 70%
in terms of your total debt no other practical tip that I want to share with
you guys in opinion is when you do use a HELOC keep it within less than 30% of
your HELOC limit so here’s what I mean let’s say you have a $50,000 HELOC limit
that you’re given okay remember HELOC works similar to a credit card and you
have a limit not the total loan my recommendation is used only 30% of this
$50,000 okay so less than $15,000 right because what happens is well two things
number one this also helps you when it comes to keeping that debt level below
70% number two because a HELOC is a revolving line of credit if you exceed
30% limit as far as usage of your credit it may actually have a negative impact
on your credit in terms of your utilization rate which if you guys know
your FICO score approximately 30% of your FICO score is about the utilization
how much of your credit are you actually using now some banks actually may report
your home equity line of credit as a installment loan which in that case it
won’t have any effect on your utilization and your usage on your
credit and your FICO score the third thing I want to share with you guys is
keep the communication and the relationship going with your lender
slash Bank I mean nothing is ever worse than getting into recession and your
bank doesn’t know who you are right because bank stirs gonna start to make
some moves when there’s a recession they’re gonna try to protect themselves
protect their money and the worst thing that you want to do is turn your
shoulder on the banks so what you want to do is build that relationship with
your banker build that relationship with your bank because what happens is you
want to make sure that you leverage that relationship if there is a recession
coming on you you’ll be able to have a communication or a conversation as far
as negotiating the the HELOC or modifying your loans or you want to make
sure that you have plenty of safety net if there is ever a big big trouble
looming ahead so I hope that this give you guys some practical tips as well as
my awareness as to what you can do to protect yourself with your HELOC during
the next recession now again if you guys felt like you got ton of value from this
guys be sure to hit the like button as well as subscribe to our YouTube channel
and hit the bell icon so that you can notified for future videos guys stay
safe stay educated and I’ll see you guys in the next YouTube video