"You Have No Mortgage, Pay Off Your Debt!"

Summary

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Podcast Summary: "You Have No Mortgage, Pay Off Your Debt!"

The Ramsey Show Highlights — November 14, 2025
Hosts: Dave Ramsey, Rachel Cruze
Caller: Josh
Theme: Taking Responsibility and Getting Back on a Debt-Free Path

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Episode Overview

This episode of The Ramsey Show Highlights dives into a listener's real-life financial dilemma: Josh and his family were living debt-free with a paid-off house but took out a sizeable HELOC (Home Equity Line of Credit) for a home remodel. Now they're struggling to make progress on the principal and considering converting their HELOC into a longer-term mortgage. Dave and Rachel firmly coach Josh back to financial basics, emphasizing hard choices and getting “gazelle intense” on debt payoff.

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Key Discussion Points & Insights

1. Caller Situation: Stuck with an Interest-Only HELOC

• Josh has a $65,208 balance on a variable-rate interest-only HELOC. He makes monthly payments of around $450, but isn’t paying down the principal.
• The family’s private school tuition for four kids is $3,704 per month.
• Combined household take-home income: ~$11,500/month.
• They have no mortgage—the house is paid off.
• Josh’s wife has just returned to work, adding $1,000/month to income.
• They originally borrowed $105,000 for a remodel after becoming debt-free.

2. Hosts’ Initial Reaction: “Where’s the Money Going?”

• Rachel Cruze, surprised: “Your house is paid off. Why did you, why would you take the HELOC out on? Do what?” (01:44)
• Dave Ramsey probes for their exact cash flow and spending patterns, noting that—without a mortgage—they should have ample funds to aggressively pay down the HELOC.

3. Identifying the Real Issue: Discipline, Not Payments

• The main problem isn’t that they can’t afford larger payments, but rather a lack of urgency and prioritization.
• Dave: “It has nothing to do with the payment. It has to do with the fact that you're like, I'm tired of paying this. Can't I just roll it into my mortgage?” (03:11)
• The hosts emphasize, don’t treat a HELOC like a long-term mortgage to make debt emotionally easier to live with.

4. Advice: Stop Everything, Get “Back to Baby Step Two”

• Rachel: “You're living like you're on baby steps four, five, and six, but you're not. You guys are back to baby step two, which means beans and rice. Rice and beans. And you're doing nothing now. Nothing but paying down the 65,000.” (04:03)
• All unnecessary spending, retirement investing, and college savings should pause until the HELOC is gone.
• Dave: “I don't like you putting it into a mortgage because now this is risk on your home...you're averse to paying off debt. So this is a can that you're going to kick down the road for a really long time. And I think you're trying to put yourself in a position where you can kick the can down the road.” (05:25)

5. How Much Should They Put Toward Debt?

• With their income and no mortgage, Dave and Rachel push Josh to find at least $2,000/month to go toward the debt.
• Rachel: “Shop at Aldi. Shop at Aldi. Don't go out to eat, don't go on vacation, cut subscriptions, do nothing until this is paid off.” (04:32)

6. Rule of Thumb for HELOCs

• If a HELOC is more than half your annual income, it could make sense to roll it into a mortgage.
• In Josh’s case, $65k is less than half of their $140k annual take-home, so it remains a priority debt to be attacked in “Baby Step Two” style.
• Rachel: “It's half of your annual income is the heloc. And that's kind of just the rule of thumb around Ramsey...But I think it's just the pain of...the consequences of going backwards.” (08:04)

7. Emotional Reality and Encouragement

• Rachel urges Josh to let the discomfort fuel his debt payoff:
  Rachel: “That should make you go, holy crap, I gotta get my butt in line and I gotta like, go. And instead you're like, get this paid.” (06:23)
• Both hosts encourage Josh that they can do it in two to two-and-a-half years, especially with focused intensity and possible side income:
  Rachel: “When you have that all paid off, you're not even gonna have to worry about this. And I think you can do it in two, two and a half years.” (07:36)

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Notable Quotes & Memorable Moments

• Rachel Cruze (04:03):
  "You're living like you're on baby steps four, five, and six, but you're not. You guys are back to baby step two...beans and rice. Rice and beans. And you're doing nothing now. Nothing but paying down the 65,000."
• Dave Ramsey (05:25):
  "I don't like you putting it into a mortgage because now this is risk on your home...you're averse to paying off debt. So this is a can that you're going to kick down the road for a really long time."
• Rachel Cruze (07:13):
  "I want to...shake you back into reality of where you are financially. And so that's where you guys are...And y' all paid off your house. Like, you can do this."
• Josh (06:14):
  "And I'm 46 and stopping retirement right now."
• Rachel Cruze (06:17):
  "You're 46 and...Sorry, took out a hundred thousand dollars that you borrowed on your home. Like, I don't..."
• Rachel Cruze (08:35):
  "And that's feeling that. And that's what happens, you know, and people, you know, listening right now, that happens to people because of, you know, a job loss...sometimes it happens because of life happening to you. Josh, I love you, but sometimes it's...us choosing to make the kitchen the new kitchen."

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Important Timestamps

• 00:06–01:44 — Josh outlines his family finances and the HELOC dilemma.
• 03:08–03:59 — Hosts dig into where the money is really going, question spending habits.
• 04:03–04:40 — Rachel and Dave urge a return to "beans and rice" mode; cut all extras.
• 05:25–06:17 — Dave and Rachel explain why converting to a mortgage is a dangerous temptation.
• 07:13–07:47 — Rachel encourages Josh with tough love—"shake you back into reality."
• 08:04–08:35 — The Ramsey “rule of thumb” for HELOCs and annual income explained.
• 09:19–09:51 — The pitfalls of variable rates and the rise of HELOC usage during COVID discussed.

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Conclusion

Dave and Rachel drive home a tough-love, back-to-basics approach: Josh and his family must treat their HELOC like any other debt and attack it with complete financial intensity, pausing all investing and extras, relying on their strong income and commitment. Their story is a candid lesson for listeners about the danger of sliding back into debt, even after reaching major milestones like a paid-off house, and the importance of sticking to a disciplined, step-by-step financial plan.

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Call to Action:
If you find yourself in a similar spot, remember the Ramsey rule: don’t rationalize new debt with old victories—get mad at debt and clean it up fast to regain your freedom.

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Transcript

[Narrator]

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[Josh]

I had a question about converting a home equity line of credit over to like a 12 or 15 year mortgage because we're not making any progress. We're just paying interest only right now and will for the foreseeable future.

[Rachel]

Okay. Because of the payment and that's what you guys can afford or what?

[Josh]

We pay a ridiculous amount for private school education for four kids and that's kind of locked down our monthly, I guess, ability to make any progress.

[Dave]

How much, how much is the HELOC and how much is the tuition for the four kids?

[Josh]

Sure. So the, like the interest only payment or how much do we owe on the.

[Dave]

Why don't you tell me both? What's the total amount and how much do you pay every month?

[Josh]

Sure. So we owe $65,208 and then our minimum, our interest only payment each month is right around 450. It kind of fluctuates because it's a variable rate. And then our monthly monthly payment for private school is $3,704.

[Dave]

And what's your income between you and your wife?

[Josh]

Sure. So I just changed. My wife just went back to work this year. So she'd been out of work raising the kids. Out of work. She's. How insensitive. No, she, she was at home with the kids and just went back to work a month ago. So that just added about $1,000 a month. So our total take home is right around and sorry, 11,500 right around there.

[Dave]

And what's your mortgage payment?

[Josh]

We don't have one.

[Rachel]

Oh, it's. Your house is paid off. Why did you, why would you take the HELOC out on? Do what?

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[Rachel]

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[Josh]

It just takes that stress out of the day to day life.

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[Rachel]

Today your house is paid off. What did you take the HELOC out on?

[Josh]

Do what to do? We lost our minds. We. We paid off the house. We were completely debt free and we were working baby steps four, five and six. And then I had some really good ideas and it turns out they were terrible ideas. And we borrowed 105,000 for a home remodel and then spent the rest in cash.

[Dave]

Okay, but still, you were. You're making 11,500 schools. 3,000amonth total, right?

[Josh]

3,730. 700.

[Dave]

Okay, still. So you're at 7,000amonth. You have no mortgage. Where's the problem here? To pay for 50amonth or more. You could pay $1,000 a month to pay off this HELOC.

[Josh]

Yeah. It would just take forever.

[Dave]

There's the problem. Okay, Now, Rachel, now we got to the bottom of it. It has nothing to do with the payment. It has to do with the fact that you're like, I'm tired of paying this. Can't I just roll it into my mortgage? So. Or create a mortgage out of it?

[Rachel]

Which would be a difference, though, for you, Josh, like, what's the. It's all. It's all the same. Is it just the interest that you're worried about?

[Josh]

Yeah, it's that we're not making any progress. It was interest only, so we're not making a dent in the 65,000.

[Rachel]

So how much extra could you pay?

[Dave]

Is.

[Rachel]

Say you did convert it to a mortgage, how much extra would you find to pay to pay it? Because if you kept it at 450, I'm not going to be.

[Dave]

How much?

[Josh]

500Amonth.

[Rachel]

Where's all your money going, Josh? I'm confused.

[Josh]

I mean, can you guys log into my Every dollar app?

[Rachel]

Yeah, I. I know. I kind of want to.

[Dave]

You log in. Why don't you log in and tell us?

[Rachel]

You're living like you're on baby steps four, five, and six, but you're not. You guys are back to baby step two, which means beans and rice. Rice and beans. And you're doing nothing now. Nothing but paying down the 65,000. This could be a student loan. This could be a car. You could throw any. Any type of debt on this. That's what this is. And you guys are back to that starting point.

[Dave]

And it doesn't need to be a mortgage.

[Rachel]

Yeah. I mean, just, like, live on nothing. You don't have a house payment. Like.

[Dave]

I'm laughing because it's. It's kind.

[Rachel]

Shop at Aldi. Shop at Aldi. Don't go out to eat, don't go on vacation, cut subscriptions, do nothing until this is paid off.

[Dave]

Yes. And you've got the income to do it.

[Rachel]

I mean, you gotta at least find 2,000 out of this.

[Josh]

I mean, not really. When we. When we look at the numbers and where we're allocating funds, like contributing to the Ross.

[Rachel]

No, stop it, Josh. Stop it. You're on baby step two, Josh. You're not on baby steps four, five, and six. Stop the kids college. Stop retirement, all of it. And get this $65,000. It's paid off. You gotta.

[Dave]

Because.

[Rachel]

Because, Josh, because what are you wanting to convert it to a mortgage and then put it, what, in baby step six and then just kind of slowly, like, just get rid of it?

[Dave]

Yeah, that's what he wants to do.

[Josh]

Yeah. Because then with the extra if we paid, you know what we're paying right now for it, in addition to.

[Dave]

Here's why I don't like that for you. Here's why I don't like that for you, because you already. I don't like you putting it into a mortgage because now this is risk on your home. Right. And I don't like this because you're already like. It sounds like you're averse to paying off debt. So this is a can that you're going to kick down the road for a really long time. And I think you're trying to put yourself in a position where you can kick the can down the road. Yeah.

[Rachel]

Because you guys make how much a year.

[Josh]

Right now? About 140.

[Rachel]

Okay. Yeah. Because kind of our rule of thumb, Josh, is if. If a HELOC is over half of your annual income, then we say you can roll it into your primary mortgage, but it's not. Yeah, it's less than half of it. So it's got to be on baby step two.

[Josh]

And I'm 46 and stopping retirement right now.

[Rachel]

You're 46 and. Sorry, took out a hundred thousand dollars that you borrowed on your home. Like, I don't.

[Dave]

That should make you more intense that the fact that you said, oh, my gosh, I'm 46. I took out this HELOC. I have to pause retirement. That should make you go, holy crap, I gotta get my butt in line and I gotta like, go. And instead you're like, get this paid.

[Rachel]

Hey, Josh, get this paid off in two years. Get it paid off in two years.

[Dave]

That.

[Rachel]

Yeah, I mean that. So that you. Yeah. You called. I think you're. I think you were enjoying the ride of baby steps 4, 5, and 6. Then you went back in debt, which takes you back to baby step two.

[Josh]

I never wanted to call because of that, because I was afraid Dave was gonna answer and then I was gonna get destroyed.

[Rachel]

Nicer than him, though, saying it with a smile.

[Josh]

Yeah, no, it's. It's it's awful.

[Rachel]

No, I'm not saying. I know.

[Dave]

We're not trying to make you feel bad.

[Rachel]

Trying to make you feel bad, Josh.

[Dave]

I know.

[Rachel]

I just want to. I want to. I need you. I'm trying to shake you back into reality of where you are financially. And so that's where you guys are. And so you gotta go back in that mindset and. And y' all paid off your house. Like, you can do this. You guys can do this. And I know that it's not fun, but I'm like, when you have that all paid off, you're not even gonna have to worry about this. And I think you can do it in two, two and a half years.

[Dave]

Yeah.

[Rachel]

And if your wife works extra, if she. If she makes double what she's making now instead of a thousand dollars a month, people do that on a side hustle. Right. I'm like, have her go back more full time.

[Josh]

You do have. Yeah, I've been doing real estate for 10 years. And so right now with working full time government, I do about six to eight transactions a year in real estate. So if. If that comes through and if that continues, we could. If we went back to step two.

[Rachel]

Yeah.

[Josh]

It's just not. We can't count on it. Okay, so baby step two. Final.

[Rachel]

I would. And final, final answer. And again, just. I go back to the math of it then. The math doesn't have emotions, so it doesn't have my, like. Josh, what did you do? It is half of your annual income is the heloc. And that's kind of just the rule of thumb around. Ramsey, if it's half of it, you put it in baby step two. If it's more than that, you know, if you had. If it was at still a hundred thousand dollars, that'd be a little different. Then it would be a little different and we could talk about, you know, that. But I think it's just the. It's the pain of. It's the pain of the consequences of.

[Dave]

Going backwards, of course.

[Rachel]

And that's feeling that. And that's what happens, you know, and people, you know, listening right now, that happens to people because of, you know, a job loss. They go through their emergency fund, they can't replace an income, they go back into debt. Like, sometimes it happens because of life happening to you. Josh, I love you, but sometimes it's.

[Dave]

Us choosing to make the kitchen the new kitchen.

[Rachel]

Yes, yes. And so that's why you got.

[Dave]

Yeah.

[Rachel]

And the heloc. And I bet. I bet it. Because he said I think they started at 120 or something. So, I mean, they've, they've, they've knocked some of it down, which makes me think they got it a few years ago during the COVID Oh, yeah. 2021, 2022, when. When HELOCs just became so popular because everyone's at home being like, okay, let's.

[Dave]

Get a pool and everybody's mortgage doubles. Yeah, that's right. Yeah, their value.

[Rachel]

That's right. You get all this equity and you're like, okay, this, but that's the problem. And then also hear the pain, you guys, of, of the, of the variable rate. The variable rate.

[Dave]

It.

[Rachel]

The heloc. It's all. Yes, it is up and down and it kind of rides that wave and, and all the formulas of even how they, how they get it. So just cash flow, these things, you guys, and it takes longer. It's not as fun, it may not be as beautiful, but at least you can afford it that you're living within your means. So, Josh, we are cheering you guys on. Call us back in two and a half years.

[Dave]

I hope it's sooner.

[Rachel]

Do your another do another debt free.

[Narrator]

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