We've Been Using Our HELOC As A Giant Credit Card

Summary

The Ramsey Show Highlights – Episode Summary

Episode Title: We've Been Using Our HELOC As A Giant Credit Card
Date: November 22, 2025
Host: Ramsey Network
Format: Call-in advice with financial experts

---

Episode Overview

This episode centers on a caller, Carol from Canada, who, after facing pandemic-related financial setbacks, began using her Home Equity Line of Credit (HELOC) much like a giant credit card to cover home renovations and living expenses. Despite a high household income, the family now faces a daunting HELOC balance and must decide whether to roll it into an upcoming mortgage renewal or aggressively pay it down separately. The hosts offer tactical steps, highlight common financial pitfalls for high earners, and reinforce core Ramsey principles.

---

Key Discussion Points and Insights

Carol's Situation:

• Background:

  • Pandemic led to failed investments and unexpected bad debt.
  • HELOC (Home Equity Line of Credit) used extensively; treated like credit due to cash flow shortfalls.
  • Mortgage up for renewal in June.

• Financial Details:

  • HELOC Balance: $400,000 [01:02]
  • Household Income: $500,000/year before taxes, ~$200,000–$300,000/year after [01:14, 02:00]
  • Mortgage: $750,000 at 3.6% interest. House valued at $2.5 million [02:12]
  • HELOC Interest Rate: 4.5%, variable [02:24, 04:43]
  • Expenses: About $12,000/month, including three kids in private school and $1,800/month in HELOC interest [03:47]
  • Emergency Fund: $5,000 in cash; $50,000 in education savings for kids; a couple hundred thousand in retirement accounts [02:58, 03:16]

Should Carol Roll the HELOC Into Her Mortgage?

• Host’s Analysis:

  • HELOC is over half their annual income, making it substantial debt.
  • "Generally, with HELOCs, if it's over half your annual income, we say, hey, roll it into your baby step six, which is when you pay off the mortgage." — Financial Advisor 2 [02:40]
  • Carol does not have consumer debt outside the HELOC and mortgage, so this is a unique case.

• Mortgage Renewal Context:

  • In Canada, mortgage rates are reset every five years.
  • New mortgage interest rate expected to drop (likely between 2.9% and 3.2%) [05:00]
  • Mortgage would be 29-30% of take-home pay if the HELOC was rolled in—a bit above Ramsey's recommended threshold.

• Variable vs. Fixed Rate Discussion:

  • HELOC’s variable rate is riskier; experts prefer fixed rates if possible.
  • "At 4.5 on 400,000, I wouldn't want to see that on a variable rate." — Financial Advisor 1 [06:26]
  • Keeping HELOC separate may maintain urgency to pay it off aggressively.

Actionable Advice and Strategy:

• Budgeting:
  Carol and her husband, despite high earnings, are spending most of their take-home due to high living costs (private school, lifestyle inflation).

  • "You guys are spending close to 20 grand a month." — Financial Advisor 2 [03:42]
  • "What can we do to decrease our lifestyle and expenses?" — Financial Advisor 2 [09:09]

• Aggressive Payoff Plan:

  • Suggestion: Pay off the $400,000 HELOC in three years — $11,000/month [07:00]
  • "Come hell or high water, we're going to throw 11 grand a month at the HELOC." — Financial Advisor 2 [07:00]
  • Once HELOC is gone, use momentum to attack the mortgage; could be debt-free in about 9 years as kids leave for college [08:15]

• Lifestyle Considerations:

  • Advise evaluating and reducing discretionary expenses (e.g., consider public school as private school fees are a major outflow).

• Ramsey Principles Emphasized:

  • Keep all housing costs (mortgage, HOA, insurance, etc.) at no more than 25% of take-home pay [06:26]
  • Avoid “kicking the can down the road” by rolling variable debts into longer-term fixed debt without a plan.
  • "Live on less than you make. If you get a raise, ignore it and just invest the difference." — Financial Advisor 2 [09:22]

---

Notable Quotes and Memorable Moments

• On Spending vs. Earning:

  • "You couldn't cash flow the renovations, making half a million dollars." — Financial Advisor 2 [01:20, repeated at 01:54]
  • "It's hard to feel bad when you're making half a million, even after taxes, $300,000. Quite the shovel." — Financial Advisor 2 [08:51]
  • "You just, you know, make decisions with bigger zeros on the end." — Financial Advisor 1 [09:03]

• On Debt Aggression:

  • "I could give a RIP at this point, I just want to see you guys plow through these debts." — Financial Advisor 2 [07:00]
  • "If you can do more than $11,000 a month, be my guest... You and your husband should sit down tonight and go, we got to clean this up." — Financial Advisor 2 [07:33]

• Perspective on Canadian Mortgages:

  • "God bless the strangeness of Canada. Every five years we reset the mortgage rates." — Financial Advisor 2 [04:49]

• On Universal Financial Behavior:

  • "Love hearing from our Canadian listeners just to know that Canada has its own problems. You know, people are making crazy decisions all over the world." — Financial Advisor 2 [08:31]

---

Timestamps for Important Segments

• [00:06–01:20]: Carol explains her situation: pandemic, failed investments, HELOC debt.
• [01:20–02:12]: Details on income, tax hit, mortgage, and home value.
• [02:33–02:58]: Advisors discuss HELOC in context of Ramsey steps and ask about other debts.
• [03:11–04:05]: Budgeting, emergency funds, and monthly outflows.
• [04:43–05:37]: Advisors and Carol talk about Canadian mortgage rules, rate resets.
• [06:17–07:00]: Advisors outline the risks of variable HELOC rates and restate Ramsey’s 25% mortgage rule.
• [07:00–08:15]: Aggressive payoff plan sketched out ($11,000/month for HELOC).
• [08:31–09:22]: General commentary on financial discipline for high earners and closing advice.

---

Conclusion

Carol’s story is a case study in how even high-income households can slip into overwhelming debt through a combination of lifestyle inflation, unexpected setbacks, and using home equity as a credit line. The hosts recommend setting an aggressive, short-term payoff plan for the HELOC, keeping it separate from the mortgage to maintain accountability, and tightening the family budget. The episode underscores Ramsey core principles: keep housing costs at 25% (post-tax), attack debt with intensity, and live below your means to build lasting wealth.

Transcript

[EveryDollar App Announcer]

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

[Caller (Carol)]

So we had a series of kind of unfortunate events that took place over the pandemic, and it caused us to take on quite a bit of bad debt. So we made improvements on the home with plans of investments coming through, and those investments did not to come fruition and essentially went to zero. So since then we've been really treating our HELOC like a giant credit card. Prior to me finding this podcast. So I'm in Canada. So our mortgage is up for renewal in June. I'm in Baby Step 2, and the amount of the HELOC is so overwhelming that I feel like I'm not sure whether I should be rolling it into our mortgage in June or whether we should be continuing for the next five or six years on paying it down. Keeping in mind that I have three kids who are looking to go to university in the next five to eight years. So. Yeah.

[Financial Advisor 1]

How much is the HELOC?

[Caller (Carol)]

So the HELOC is at 400,000.

[Financial Advisor 1]

Oh my gosh. What's your income?

[Caller (Carol)]

So our income. Well, before or after tax? We've got some pretty hefty taxes.

[Financial Advisor 2]

Before taxes?

[Caller (Carol)]

Oh, before. About 500 a year.

[Financial Advisor 1]

Oh my gosh. Woman.

[Caller (Carol)]

Yeah.

[Financial Advisor 2]

You couldn't cash flow the renovations. Making half a million dollars.

[EveryDollar App Narrator]

Meet everydollar budgeters. Christy and Steve. Their life is chaotic. Their money is simple because they budget with every dollar.

[Financial Advisor 2]

Budgeting with the spreadsheet took a ton.

[EveryDollar App User]

Of time, but now with every dollar, I can do a budget in five minutes.

[EveryDollar App Narrator]

And tracking purchases is just as simple.

[EveryDollar App User]

It's so freeing to know exactly where your money is going.

[Financial Advisor 2]

It just takes that stress out of.

[Caller (Carol)]

The day to day life.

[EveryDollar App Narrator]

You got this Hannigan family. Every dollar. Create your free account today.

[Financial Advisor 2]

You couldn't cash flow the renovations. Making half a million dollars.

[Caller (Carol)]

Yeah, I. But after tax, it's only about 200. 300 a year is what we take home.

[Financial Advisor 2]

Okay.

[Financial Advisor 1]

Okay, well, what's your like?

[Caller (Carol)]

It's significant tax.

[Financial Advisor 1]

What do you owe on the house? Aside from this?

[Caller (Carol)]

Yep. So we have a mortgage for 750,000 and that's at 3.6%, but the house is valued at 2.5 million.

[Financial Advisor 1]

Okay, what's the, what's the percentage on the HELOC? What's the interest?

[Caller (Carol)]

It's 4.5.

[Financial Advisor 2]

And then what other debt do you have outside of the mortgage and heloc?

[Caller (Carol)]

That's it.

[Financial Advisor 2]

Okay. I thought you were going to hit me with a bunch of consumer debt. All right.

[Caller (Carol)]

No, because it's all rolled into one. And I think I've never heard. I've been binging this and I've never heard how you attack just like one big.

[Financial Advisor 2]

Yeah, generally. Here's our parameter. With HELOCs. If it's over half your annual income, we say, hey, roll it into your baby step six, which is when you pay off the mortgage. So that's when you would pay it. Versus in baby step two with other consumer debt. Since you guys have no consumer debt. Do you have an emergency fund? Do you have savings?

[Caller (Carol)]

We just started that. We have some education savings for about 50 grand for the kids right now. And then just retirement fund. We have maybe a couple hundred thousand, but other than that, not really.

[Financial Advisor 2]

Do you have anything in cash? Like if you had an emergency today, how would you pay for it?

[Caller (Carol)]

I already did baby step one, so I have. We probably have about 5,000 in cash.

[Financial Advisor 2]

Okay. But your next paycheck is going to be sizable. You're going to make like what, 25 grand on the next check?

[Caller (Carol)]

Yeah, like per month. My husband and I are. Yeah, we bring home around 25 grand a month.

[Financial Advisor 2]

Okay. How much of that could you throw into a savings account next month, for example?

[Caller (Carol)]

If I wasn't putting it towards the HELOC, then probably seven grand.

[Financial Advisor 2]

So you guys are spending close to 20 grand a month.

[Caller (Carol)]

I'd say our spending kids are in private school. The interest on the heloc is about 1800. So yeah, like I'd say we spend around 12 grand a month on.

[Financial Advisor 2]

The private school for all three kids.

[Caller (Carol)]

Yes.

[Financial Advisor 2]

Man, that's. That's a real. That's. Your burn rate is high here. You've got a lot of expenses going on. I'm guessing we're not going to put them in public school to clean up this mess.

[Caller (Carol)]

Well, they're almost out so into like to middle school. So that's going to change and get better over the next couple years. I just, I didn't want to feel like I was rolling the HELOC into the mortgage and kicking the can down the road and whether I should, you know, roll some of it in and then keep some of it and attack that really fast. I'm not sure.

[Financial Advisor 2]

I kind of like them broken up just for. I mean, is the HELOC going to have a variable rate here?

[Financial Advisor 1]

Ask the same thing.

[Caller (Carol)]

It's currently variable, but again, in June we signed the next five year mortgage so it would lock in at whatever the interest rate is, which is.

[Financial Advisor 2]

God bless the strangeness of Canada. Every five years we reset the mortgage rates.

[Financial Advisor 1]

What's going to be the new mortgage rate when you renew in June? Because it's going to, it's 3.6 now. What's it going to go to?

[Caller (Carol)]

It'd probably go down. So between 2.9 and 3.2.

[Financial Advisor 1]

Interesting. So if you, have you done the math, if you, if you did that, what percentage of your income would this mortgage be?

[Caller (Carol)]

So that would move us from the 25% to about 29 to 30% of house expenses on a 30 year, or.

[Financial Advisor 1]

Are you doing a 15 year?

[Caller (Carol)]

We haven't discovered that yet. My calls tomorrow with the bank.

[Financial Advisor 2]

Okay. My guess is, well, they don't do the 30 and 15. You have like a five year old.

[Caller (Carol)]

Oh, and it rolls every, you still do like a 15 or 20 year, but every five years you revisit it and you get to redo it.

[Financial Advisor 2]

Okay.

[Financial Advisor 1]

How often does the rate on the HELOC variate, It's variable.

[Caller (Carol)]

So was high over every month, couple years, but dropping now it's every month that the interest comes out. But then just depending on what the, you know, bank of Canada does, the interest rate goes up and down.

[Financial Advisor 2]

Okay.

[Financial Advisor 1]

If there was a world where you locked this in at 2.9 and it was 25% of your take home pay and it kind of fit those same parameter, it wouldn't bother me. I don't mind it being separate though, for the idea of you really getting after it. I'm afraid that if you roll it in, you won't get after it the way you need to and you'll kick the can down the road.

[Caller (Carol)]

Okay. Okay. So there is maybe a point in which some of it we roll in as long as we keep that 25% into the home from our income.

[Financial Advisor 1]

Well, the rule of thumb here is you don't want your mortgage to be any more than 25% of your take home pay. So after taxes you don't have to think about, you know, insurance and investing and all that jazz. I'm just talking about after taxes you don't want it to be more than 25% with all in with HOA fees, insurance, all of that. Because once you get above that, it can be, it can be too much of your world. So that's, that's kind of what I was looking at at 4.5 on 400,000. Yeah, I wouldn't want to see that. I wouldn't want that on a variable rate. Let me just say I just feel.

[Financial Advisor 2]

Like I'm less emotionally attached to interest rates. I could give a RIP at this point, I just want to see you guys plow through these debts. And so personally, I would keep the HELOC separate and make an aggressive goal to pay this off. And let's say three years, it's 133 grand a year. That's 11 grand a month. Come hell or high water, we're going to throw 11 grand a month at the HELOC. Is that something you guys could do?

[Caller (Carol)]

Yeah, I think we could. I just needed to know. It just. I've heard that last week it was like, if it's half more than half this, you roll it in. And I just wasn't sure if there was a difference.

[Financial Advisor 1]

It's not about rolling it in, it's about you're attacking it.

[Financial Advisor 2]

So, yeah, the timing of it. And so for you guys, since you don't have consumer debt, you're just looking at these two debts going, what do I do with these? I would just plow through. If you can do more than 11 grand a month, be my guest. I'm just throwing a random goal out there. You and your husband should sit down tonight and go, we got to clean this up. And to that end, I might delay some of the kids stuff. Like, we got time to catch up on that. Right now we've got this thing eating our lunch with these giant mortgages and heloc. So I would work to knock that out and then knock the mortgage out, because now, you know, if we can do 403 years, well, 750, we could probably knock that out in less than six years. Okay, so think about that. In nine years, you've got the kids off to college, right?

[Caller (Carol)]

Yep.

[Financial Advisor 2]

And you have no mortgage, no heloc. So that's the kind of future I want you guys to start envisioning and then reverse engineer it to go. Okay, what do we got to do today, this month to get there?

[Caller (Carol)]

Awesome. Thank you so much.

[Financial Advisor 2]

Yeah, absolutely. Thank you so much for the call.

[Financial Advisor 1]

That's a good question.

[Financial Advisor 2]

Love hearing from our Canadian listeners just to know that there, Canada has its own problems. You know, people are making crazy decisions all over the world.

[Financial Advisor 1]

All over the world.

[Financial Advisor 2]

But America goes first. We're like, you know what? We're going to show you the way with the HELOC to do all the renovations and go into all the consumer debt. But the good news is they have an amazing income.

[Financial Advisor 1]

They do. And that.

[Financial Advisor 2]

Yeah, it's hard to, like, feel bad when you're making half a million even after taxes. $300,000. Quite the shovel.

[Financial Advisor 1]

Yeah.

[Financial Advisor 2]

But you can see you just, you know, make decisions with bigger zeros on the end when it comes to.

[Financial Advisor 1]

It's very relative in that way. But yeah, this is. Yeah, I'm writing for more money, more problems.

[Financial Advisor 2]

Yeah. But here's the thing. You got to just, you know, baby steps, one thing at a time. And also, what can we do to decrease our lifestyle and expenses? Because even with 25 grand, you can see how quickly can disappear.

[Financial Advisor 1]

Yeah.

[Financial Advisor 2]

When you got, you know, the cleaners, the private school, this, that, the other, the heloc, the mortgage, it just eats away at even the highest incomes. And so you got to get control, live on less than you make. And if you get a raise, ignore it and just invest the difference. Give more, save more. That's the key to becoming truly wealthy. And I think Carol and her husband will get there in no time.

[EveryDollar App Announcer]

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