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6 HELOC borrowing mistakes to avoid this December
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As the holiday season approaches and year-end expenses loom, many homeowners are considering tapping into their home equity with a home equity loan or a home equity line of credit (HELOC). That can be a smart plan, especially right now, considering that these borrowing options typically have some of the lowest rates available — and that the average homeowner has about $319,000 worth of home equity to tap into.
But while home equity loans and HELOCs are both worth considering, HELOCs, in particular, can be an attractive option for accessing your home’s equity in today’s market. With a HELOC, you get low average rates and access to a line of credit that can be borrowed from multiple times (up to the limit), offering you more flexibility than you’d get with a lump-sum home equity loan.
However, the decision to borrow against your home’s equity shouldn’t be taken lightly, especially during the holiday season when the pressure to spend is at its peak. While HELOCs can be valuable financial tools when used wisely, they can also come with risks that could put your home and financial stability in jeopardy — so it’s important to avoid the big mistakes borrowers make with this option.
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6 HELOC borrowing mistakes to avoid this December
Here are a few key mistakes to avoid when borrowing from a HELOC this December.
Treating your HELOC like a holiday windfall
The temptation to use HELOC funds for holiday gifts and celebrations can be strong, especially when credit cards are maxed out or savings are running low. However, using your home equity to fund temporary seasonal expenses is a serious financial mistake. After all, you’re borrowing against your house — one of your most valuable assets — and the items you’re purchasing will likely depreciate or be consumed long before you’ve finished paying for them. Holiday expenses should ideally be covered by current income or dedicated savings, not long-term debt secured by your home.
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Borrowing without understanding variable rates
Another common mistake that HELOC borrowers make is failing to fully grasp how variable interest rates work. Unlike fixed-rate home equity loans, HELOCs typically come with variable rates that can fluctuate significantly over time. While HELOC rates might seem attractive now, and if rates drop over time (as expected) it could make them even more enticing, it’s important to remember that the rate environment can change quickly.
If rates climb, the rate on your HELOC could rise substantially in the future, potentially making your monthly payments unaffordable. So before opening a HELOC this December, make sure you’ve calculated how your payments would change under different interest rate scenarios and have a solid plan for managing potential rate increases.
Focusing solely on the draw period
Many homeowners make the critical error of focusing solely on the draw period without preparing for what comes next. During the draw period, which is the period when you “draw” from your line of credit, you typically only need to make interest payments, but when that draw period ends, you’ll need to start repaying both principal and interest. This can lead to payment shock if you haven’t planned accordingly. Prior to opening a HELOC this December, then, it makes sense to create a detailed repayment strategy that accounts for the eventual end of the draw period and the higher payments that will follow.
Overborrowing and reaching your limit
The convenience of the line of credit you get with a HELOC can lead to overborrowing, and it’s crucial to borrow only what you truly need and can repay comfortably. Maxing out your HELOC not only limits your financial flexibility but can also negatively impact your credit score (and, as a result, your overall financial picture). If you plan to open a HELOC this December, just be sure to carefully evaluate your needs and avoid using your HELOC for non-essential expenses.
Ignoring the risk to your home
Unlike other types of credit, a HELOC is secured by your home, and failing to make payments on what you borrow could ultimately result in foreclosure. This is especially critical during December when budgets are often stretched thin and the temptation to borrow more than necessary increases. To safeguard your home, only borrow what you can confidently repay and prioritize HELOC payments in your financial planning.
Misunderstanding the tax deduction rules
Some borrowers mistakenly assume all HELOC interest is tax-deductible, leading to poor borrowing decisions based on anticipated tax benefits. But HELOC interest is only deductible if the funds are used for buying, building or substantially improving the home that secures the loan.
Using HELOC funds for debt consolidation, education expenses or other purposes can be a good move depending on your needs, but it also means losing the tax deduction benefit. Before taking out a HELOC this December, it could benefit you to consult with a tax professional to understand exactly how your intended use of the funds will impact your tax situation.
The bottom line
Tapping into your home equity through a HELOC can be a valuable financial tool when used wisely. However, the key to success lies in avoiding common mistakes that could undermine your financial health. So, this December, let your HELOC be a strategic asset and not a financial liability. Make sure to approach this type of borrowing with caution, prioritize responsible borrowing and enjoy the peace of mind that comes with making informed decisions.
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Amazon secretly excluded two zip codes from its fastest delivery service while charging nearly 50,000 Prime members who live in the areas its full Prime subscription price, the District of Columbia’s attorney general alleges in a lawsuit filed Wednesday.
Amazon violated consumer protection laws by stopping its quickest delivery service to the two historically lower-income neighborhoods, then misled customers about why their packages were arriving later than advertised when they complained, according to the suit filed in D.C. Superior Court.
The world’s biggest online retailer’s paid subscription service, Amazon Prime, offers two-day delivery for millions of items, as well as next-day or same-day for many other products for $139 a year, or $14.99 a month.
Amazon in June 2022 decided to stop using its fleet of branded trucks to make Prime deliveries to DC zip codes 20019 and 20020, servicing them instead with third-party delivery services like UPS and the U.S. Postal Service. The company knew the decision would result in significantly slower deliveries for the areas, but did not tell existing or prospective customers, the suit alleges.
Amazon informed the attorney general’s office that the change came as the result of safety concerns for its drivers, the attorney general said. Yet the company was legally obligated to disclose the change to customers.
“Amazon is charging tens of thousands of hard-working Ward 7 and 8 residents for an expedited delivery service it promises but does not provide. While Amazon has every right to make operational changes, it cannot covertly decide that a dollar in one ZIP code is worth less than a dollar in another,” D.C. Attorney General Brian Schwalb stated in a news release.”We’re suing to stop this deceptive conduct and make sure District residents get what they’re paying for.”
Amazon Prime two-day delivery
Last year, the rest of the city’s Prime members received packages within two days of checkout 75% of the time, but those in the impacted ZIP codes received their orders within two days just 24% of the time, according to the suit.
Office of the Attorney General for the District of Columbia
Amazon dismissed as “categorically false” claims that its business practices are discriminatory or deceptive.
“We want to be able to deliver as fast as we possibly can to every zip code across the country, however, at the same time we must put the safety of delivery drivers first,” an Amazon spokesperson said in an emailed statement.
The spokesperson added, “In the zip codes in question, there have been specific and targeted acts against drivers delivering Amazon packages. We made the deliberate choice to adjust our operations, including delivery routes and times, for the sole reason of protecting the safety of drivers.”
The company said it’s clear with customers about expected delivery dates. “And we’re always transparent with customers during the shopping journey and checkout process about when, exactly, they can expect their orders to arrive,” the spokesperson said.
Amazon would like to work with the attorney general’s office to reduce crime and improve safety in those areas, the spokesperson stated. “Nevertheless, we will proceed in the process and demonstrate that providing fast and accurate delivery times and prioritizing the same of customers and delivery partners are not mutually exclusive.”
The lawsuit is not the first time Amazon has been accused of providing discriminatory service.
A Bloomberg analysis in 2016 found that Amazon excluded predominantly black ZIP codes to varying degrees from same-day delivery in six major cites. Amazon at the time said the issue had nothing to do with race.
And two years later, the since-discontinued Amazon Restaurants delivery service excluded the same D.C. neighborhoods that are the focus of the Prime delivery lawsuit. The company told local news at the time that it was working to bring more eateries online.
Pope Francis has received the first-ever all-electric popemobile from automaker Mercedes-Benz.
The open-top vehicle, which for the last 45 years has been manufactured by the German luxury automaker, is used by Pope Francis to greet pilgrims in St. Peter’s Square during general audiences and other papal ceremonies. The company’s CEO Ola Kallenius personally handed over the new model to the pope on Wednesday at the Vatican.
“With the new Popemobile, Pope Francis is the first pope to be traveling in a fully electric Mercedes-Benz when making public appearances,” Kallenius said in a statement. “This is a special honor for our company, and I would like to thank His Holiness for his trust.”
Pool photo/Aigav
The vehicle, a modified version of the company’s G-class mid-size luxury SUV, is in classic pearl-white, and has been developed in close cooperation with the Vatican tailored to the needs of the pope, the company said in a statement. The engine has been particularly adapted for low speeds; the seat has been heated and elevated for better visibility; and a grab bar provides stability when the Pope is standing.
“Every detail is perfection,” Kallenius told Reuters. It took “hundreds of hours of craftsmanship … to build a one-of-a-kind popemobile,” he said.
Francis has made care for the environment a priority of his papacy and has used electric cars on some of his foreign trips, but this is the first time an all-electric vehicle will be used. In 2011, the pope opted to use a plug-in hybrid as the electric version was not yet fast enough to bring the pontiff to safety in an emergency.
The first “official” popemobile was a bespoke Mercedes-Benz Nurburg 460 Pullman given to Pope Pius XI by the company in 1930. The luxurious model had silk carpeting and embossed doves decorating the interior. Subsequent popemobiles have included a 600 Pullman Landaulet and 300 SEL for Pope Jon XXIII; a modified G Class for Pope John Paul II; and the previous popemobile, used by both Popes John Paul II and Benedict XVI, another Mercedes-Benz M Class.