Use A HELOC To Save Our House?

Summary

The Ramsey Show Highlights: Use A HELOC To Save Our House?

Release Date: July 4, 2025

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Introduction

In this episode of The Ramsey Show Highlights, the Ramsey Network addresses a pressing financial dilemma brought forth by a concerned caller, Rosa. Rosa finds herself grappling with sudden unemployment of her husband, mounting debts, and the daunting prospect of losing their home. Host Dave Ramsey, alongside Dr. John Delony, delves deep into Rosa's situation, offering practical advice and emotional support.

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Caller’s Situation: Unemployment and Financial Strain

Rosa initiates the conversation by sharing the challenging news that her husband lost his job two weeks prior. She explains, “[00:12]...communication issue with his employer, who's also the owner of the company. It's a very small company, and he's been working with him for over 15 years. And he got fired over text” (Rosa, 00:12). This abrupt job loss has left the family without savings, despite Rosa’s steady income from her 401k. Their combined monthly expenses amount to approximately $5,000, which Rosa’s salary alone struggles to cover.

Rosa further elaborates on her financial obligations: “I have about $20,000 in credit cards. There's two car loans. One is about $18,000, and the other one's almost paid off. So there's maybe $1,000 left on that vehicle” (Rosa, 01:05). Additionally, she mentions having three 401k loans totaling about $26,000 that are automatically deducted from her paycheck, costing her $400 monthly.

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Underlying Issues: Long-Term Relationship Struggles

As the discussion unfolds, Dave Ramsey uncovers that Rosa and her husband have been experiencing relationship issues for approximately 15 years. Rosa reveals, “We have five kids living in the house and my father, who has been passed away. We're down to just one child whoever. Kids don't even speak to us. But I don't want to lose my house” (Rosa, 01:52). This long-standing marital tension has contributed to their current financial instability, culminating in their inability to sustain their lifestyle despite dual incomes.

Dr. John Delony emphasizes the compounded anxiety Rosa is experiencing: “… you haven't slept in the last week, have you?” (Dr. John Delony, 02:47). He advises tackling the financial crisis step-by-step to prevent overwhelming stress.

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Debate on Financial Solutions: HELOC and Debt Consolidation

Rosa contemplates taking out a Home Equity Line of Credit (HELOC) to bridge the financial gap and consolidate debts. However, Dave Ramsey cautions against this approach: “You understand you take out this home equity loan, you now have a second mortgage, and your home is at risk” (Dave Ramsey, 04:11). Dr. Delony reinforces this stance, comparing debt consolidation to merely reshaping expenses without reducing the actual burden: “No, don't do consolidation. You're just moving... It's like putting Spanx on. It doesn't make me weigh less” (Dr. John Delony, 04:19).

Dave further warns of the precarious nature of relying on a HELOC, stating, “Or it's going to be a band aid to get us to the next week... They're going to take away the home” (Dave Ramsey, 04:45). He underscores the importance of avoiding solutions that offer temporary relief but pose long-term risks.

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Practical Advice: Budgeting and Income Adjustment

Transitioning to actionable steps, Dave Ramsey advises Rosa to create a meticulous budget: “You have a solvable problem. Our expenses are $5,000. How do we get our expenses down to $4,000 or less this month...” (Dave Ramsey, 05:30). He emphasizes the necessity of prioritizing essential expenses—food, utilities, housing, and transportation—and eliminating non-essential costs.

Rosa reveals her adjusted take-home pay is around $4,000 after taxes and deductions: “Let me look real quick here. $4,000” (Rosa, 05:59). With this information, Dave outlines a plan to cut expenses and bolster income. He suggests her husband take on multiple side jobs to bridge the financial gap, highlighting the urgency of increasing household income despite his reluctance: “He’s not [willing to take side jobs]” (Rosa, 06:33).

Dr. Delony adds, “I don't have any pride. Can you say, hey, for three months... we got to go make some money” (Dr. John Delony, 07:07), encouraging Rosa to negotiate with her husband for a temporary increase in his work efforts to stabilize their finances.

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Asset Liquidation as a Solution

Dave Ramsey proposes a strategic liquidation of assets to alleviate debt: “You could make $7,000 right there and you could sell the other car and be, you know, free and clear of it with $7,000 to get you a car. Could you go down to a single car?” (Dave Ramsey, 07:35). By selling one of their vehicles, Rosa could eliminate a significant portion of their debt, reducing monthly obligations and easing financial strain.

However, Rosa expresses skepticism about her husband’s willingness to part with their assets or make necessary sacrifices: “I don't know that he'd be willing to do that either” (Rosa, 08:02). This highlights the deeper interpersonal challenges that may impede effective financial recovery.

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Conclusion: Seeking External Support and Avoiding Risky Solutions

As the conversation nears its end, both Dave Ramsey and Dr. John Delony recognize the severity of Rosa’s situation and the limitations posed by her husband’s resistance to proactive measures. Dr. Delony advises seeking support from community friends or a local counselor to navigate the tumultuous period: “Get with some girlfriends in your local community... you may need to see a local counselor” (Dr. John Delony, 08:25). He firmly advises against taking out a HELOC, emphasizing the irreversible risk of losing their home.

Dave Ramsey reiterates the importance of disciplined budgeting: “Create your free every dollar budget today. The simplest way to budget for your life” (Dave Ramsey, 09:05). He encourages listeners, like Rosa, to take immediate, concrete steps to regain control over their financial situation without resorting to high-risk solutions.

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Key Takeaways

1. Avoid High-Risk Loans: Taking out a HELOC can create a second mortgage, putting your home at risk if repayments become unmanageable.

2. Create a Detailed Budget: Prioritize essential expenses and eliminate non-essentials to align with your current income.

3. Increase Income: Explore all avenues for additional income, including side jobs or temporary work, especially during financial emergencies.

4. Communicate and Seek Support: Address interpersonal issues and seek external support from friends or counselors to navigate financial crises effectively.

5. Liquidate Assets Wisely: Consider selling non-essential assets, like an extra vehicle, to reduce debt and monthly obligations.

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Notable Quotes

• “Don't do consolidation. You're just moving dead around. It's like putting Spanx on. It doesn't make me weigh less.” — Dr. John Delony 04:20

• “You have a solvable problem. Our expenses are $5,000. How do we get our expenses down to $4,000 or less this month...” — Dave Ramsey 05:30

• “I need you to swallow your pride on this one or don't even say that because he'll fight you on that.” — Dr. John Delony 07:07

• “Create your free every dollar budget today. The simplest way to budget for your life.” — Dave Ramsey 09:05

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This episode underscores the critical importance of proactive financial management, open communication, and seeking community support during unforeseen crises. By avoiding quick fixes like HELOCs and focusing on sustainable budgeting and income strategies, listeners can navigate through financial hardships without jeopardizing their most valuable assets.

Transcript

[Dave Ramsey]

Brought to you by the EveryDollar app. Start budgeting for free today.

[Rosa]

So about two weeks ago, my husband lost his job.

[Dr. John Delony]

Oh, that's so scary.

[Rosa]

Communication issue with his employer, who's also the owner of the company. It's a very small company, and he's been working with him for over 15 years. And he got fired over text. I make decent money, but we don't have any savings. I have a 401k, but our expenses alone are about 5,000amonth. And it's just not enough to cover all of our expenses with just my salary. And I'm looking at getting a home equity loan. Not a line of credit, but a loan to hold us over and consolidate some debt until he can find some other employment.

[Dave Ramsey]

How much debt do you guys have anywhere close?

[Rosa]

I have about 20,000 in credit cards. There's two car loans. One is about 18,000, and the other one's almost paid off. So there's maybe $1,000 left on that vehicle.

[Dave Ramsey]

Okay. Any other debt?

[Rosa]

Three 401k loans that come out of directly out of my paycheck, and that's about $400 a month, and that's about $26,000.

[Dave Ramsey]

Okay. So this problem started long ago. Even with two incomes, you guys have been unable to keep up your lifestyle.

[Rosa]

Yes.

[Dave Ramsey]

So what's been going on beneath the surface? This job just revealed the house of cards that you guys have built. But it wasn't the issue.

[Rosa]

No. Our relationship has been broken for probably 15 years. We bought this house in 2017. I was able to qualify for it under just my income at the time. We had five kids living in the house and my father, who has been passed away. We're down to just one child whoever. Kids don't even speak to us. But I don't want to lose my house.

[Dr. John Delony]

I'm gonna ask you, please, please, please. Hey, Rosa, listen, you got.

[Rosa]

Yes.

[Dr. John Delony]

You got a ton going on. Okay, let's knock these out one thing at a time, okay? Because real quick, what anxiety does is it begins to go and then, and then, and then. And it spools on us, right?

[Rosa]

Yes.

[Dr. John Delony]

And you haven't slept in the last week, have you?

[Rosa]

Not a lot.

[Dr. John Delony]

I know. Please, please, please do not put your house on the auction block for a short term problem. Okay. I want to not promise you, but almost guarantee you something. Your husband has not told you the full truth about why he got fired. I've had to let.

[Rosa]

It's been a communication issue between him and the owner. And I actually know the owner. We've known him for probably the whole time we've been married. 25.

[Dr. John Delony]

Okay, hold on, hold on. You're jumping right back into solutions. I'll back out. Cool. He got fired from that. There's one solution right now. He's got to get two jobs today at Walmart and at Home Depot, and then he's got to drive tomorrow morning, and he can apply for jobs later. Y' all don't have any money. This isn't the time for hacks. This isn't the time for debt consolidation. This isn't the time for putting your house on the block. Because one thing you've proven to yourself over the last 20 years is something always comes up, and the worst case scenario usually happens. So why in the world would you put your house on the block?

[Rosa]

Yeah.

[Dave Ramsey]

You understand you take out this home equity loan, you now have a second mortgage, and your home is at risk.

[Dr. John Delony]

If you miss a payment, they take your home.

[Rosa]

Well, I make enough money that I could cover.

[Dave Ramsey]

You just told us you don't.

[Rosa]

Consolidation's gonna pay off all these credit cards.

[Dr. John Delony]

No, don't do consolidation. You're just moving. You're just moving dead around. It's like putting Spanx on. It doesn't make you. If I put on a bunch of Spanx, it doesn't make me weigh less. Right. It just makes a particular pair of pants fit better. It doesn't make.

[Dave Ramsey]

They market these products to people who are desperate, like you, thinking this is going to be the thing that fixes it all.

[Dr. John Delony]

That's right.

[Dave Ramsey]

Or it's going to be a band aid to get us to the next week. And you're going to be calling back a week from now saying we can't make the HELOC payment. They're. They're threatening us.

[Rosa]

They're.

[Dave Ramsey]

They're going to take away the home. We can't make our debt payments. So the solution here is, number one, your income and then your expenses. You said you have 5,000 expenses. Right now, we're in survival mode. So all we can cover is basic food, utilities, our housing and transportation to get us to our job. That's the only thing we're doing. Anything else is getting removed from the budget. And I can tell by the way you're talking, you guys have never sat down to make a budget to tell every single dollar where to go. So it starts tonight. We're going to go. Here's how much Rosa makes. You're going to pause all investing. Are you doing any investing right now? I'm guessing you can't because you got three 401k loans out.

[Rosa]

I'm just doing the 3% that my company matches. I just lowered it.

[Dave Ramsey]

Lower it to zero.

[Rosa]

I started.

[Dave Ramsey]

Is it at zero?

[Rosa]

Okay, okay.

[Dave Ramsey]

You need every single dollar you can squeeze out of your income. Do you understand? So 3% matters. 1% matters. So how much will you be taking home after tax, after health care premiums? How much can you bring home every month as it stands today?

[Rosa]

Let me look real quick here. 4,000.

[Dave Ramsey]

Okay, so now we have a solvable problem. Our expenses are 5,000. How do we get our expenses down to 4,000 or less this month and find out how much lower you can get those expenses and then go, how much more can we make? With husband working three side jobs this week, doing whatever he can to bring an income, swallowing his pride, doing the side gig, asking people, what can I do to serve you in exchange for money to cover the gap, he's not.

[Rosa]

Willing to do that.

[Dave Ramsey]

He's unwilling to work.

[Rosa]

He's applied for unemployment. So that's what he's been working on. He says he's been applying for job and he's had a few interviews.

[Dave Ramsey]

Is he an able bodied man, have a job yet? Pardon me, Is he an able bodied man?

[Rosa]

He's got some health issues. He's 57 years old, but he can go do something.

[Dave Ramsey]

I don't understand why he can swallow his pride and take unemployment, but he can't swallow his pride and go do two side hustles, Right? I don't understand.

[Dr. John Delony]

Have you sat down and said, I need you to swallow your pride on this one or don't even say that because he'll fight you on that. I don't have any pride. Can you say, hey, for three months? I know you're grinding, but we got to go make some money.

[Rosa]

He's counting on this 320 unemployment.

[Dave Ramsey]

That's.

[Dr. John Delony]

That's what's gonna stick it to his old boss. And the moment he gets a job, they cut it off. Like, I don't.

[Dave Ramsey]

How much are These cars worth?

[Rosa]

1 is probably about 8, probably the 18,000. It's a 21 Chrysler and mine is a 2017 Toyota Camry. But there's, like I said, we only owe two more payments on that one, so that one will be gone.

[Dave Ramsey]

Well, what's the camry worth?

[Rosa]

Probably 8,000 the way it is.

[Dave Ramsey]

And you owe one. So you could make 7,000 bucks right there and you could sell the other car and be, you know, free and clear of it with 7,000 bucks. To get you a car. Could you go down to a single car? Since homeboy is unemployed anyways?

[Rosa]

I don't know that he'd be willing to do that either.

[Dave Ramsey]

Like I said, he doesn't have any choices.

[Rosa]

We don't hardly even talk.

[Dr. John Delony]

Okay, here's the deal. We can't help you.

[Dave Ramsey]

Huh? You guys lit the house on fire and he's saying, well, he doesn't want to go. He's warm and cozy.

[Dr. John Delony]

Yeah, we can't help you if. I mean, if every option you're. You're. You're. We're putting up against. He won't, he won't, he won't. Then at some point you have to decide, do I want to be safe or not? And you. If he is really as unhelpful and is won't speak to you and whatever as you say he is, you're in a situation that is unsuccessful. Safe. Get with some girlfriends in your local community that are friends of yours and sit down and walk through the challenges here. You may need to see a local counselor. You got big challenges ahead of you, but please don't take out a HELOC on your house.

[Dave Ramsey]

Create your free every dollar budget today. The simplest way to budget for your life.