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Home Equity Loan Paydown with Divorce on the Horizon?

By Terry Savage on December 28, 2016 | Financial Planning / Retirement

Owe about $90,000 in Home Equity. The mortgage is paid in full. Have about $120,000 in stocks. Would it be smart to cash in my stocks to pay off the Home Equity debt. Also, probably will get divorced in 2017.

Terry Says

Wow, that last line was a zinger!  And I'm posting this just as you wrote it. Let's go back a bit to make sure I understand.  You paid off your mortgage, but have a home equity loan/line of credit on which you have drawn $90,000?  Is that correct? It's hard to give you advice without knowing the big picture, and the impending divorce throws another kink into advising.  I'm assuming your spouse knows that you are planning to divorce?? On a strictly financial basis, and assuming that you might have other retirement savings (?), I'd be asking why you have that home equity debt.  It is affordable right now, but as rates start rising, the interest rate on the amount you owe will also rise.  And you likely have a date within the next 10 years when that loan will come due.   The stock market is pretty fully valued right now, and it might make sense to sell at least some of your shares to pay down that line of credit.  But remember, you will need cash to pay the capital gains tax. And if you are getting divorced before the end of the year, your spouse's divorce attorney will likely go after the cash.  Unless you are really worried about the stocks you own, it might be better to come to an agreement about a division of assets, then deal with the issues you raise.     Likely the house will be sold, and they loan paid off before splitting any cash.  But many other issue will come into play.  Consult your divorce attorney and an accountant before making any moves now.  



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