Home Equity Loan: The Unemployment Insurance

As we were discussing last week ... the average home price in many parts
of USA skyrocketted in recent years. This means that your ability to take
a higher loan from that equity has increased to a level never seen by your
parents or grandparents. Our advice is: Utilize that ability but never use
that ability to spend.

So, open or keep open a home equity line of credit (which may come out
to be from anything to even $100000 for average homeowners) in a
mortgage bank. But try not to use it or try to keep the balance zero. There
could be an annual fee - you may even avoid that by selecting a fee-free
fund. There are some costs for opening an account and the annual fee
could be below 100$.

But why are we advising you to spend even that for a loan that you'll not
utilize? We see that the job market is not growing as expected. Our
parents used to keep 2 or 3 months' salary as an emergency fund for any
gap of employment that they might have to go through. Nowadays ... job
market experts suggest that we should be ready for about 6 months to a
full year of unemployment! If such an emergency comes, the above costs
may come out to be cheap premium for an effective "unemployment
insurance" which no company on the earth ever offered.

So, use your home equity line of credit as an emergency fund only.