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We are thinking about taking out a HELOC on our property. We had one for two years previously, but closed it due to a recent refinance.

The HELOC we will be choosing requires no closing costs at all. Basically, we are being told by our mortgage broker that we will have zero costs on to open. Rate is prime + .5%. We will NOT carry a balance on this HELOC whatsoever. We are at 80% loan to value ratio on our primary mortgage BEFORE the HELOC.

You may be wondering what's the point of opening this HELOC? That's our question too! Are there any reasons NOT to open this HELOC? We have a very small e-fund right now (about 1-2 months' living expenses), but plan on growing that over the next few years significantly as we have a very low debt to income ratio (we only owe on our first mortgage and one car payment). So the only thing we can think of for reasons to open this would be having a place from which to draw cash in the event of an emergency that would strip us of our small (but growing!) efund. The previous HELOC we had on this property had a ZERO balance for two years. We just never used it. We are not big spenders and have no problems with consumer debt (debt free as far as credit cards, etc.). In other words, we are out of debt and know how to stay out of debt. :)

What we are really after here is advice on whether an open (ZERO balance) HELOC account on this property hurts us in any way financially? Would it affect credit scores or how a future lender may view the HELOC? Any pitfalls to be aware of, etc?

I suppose we *might* use this someday to draw on for a down payment on a bigger home, but that would be down the road...Thanks for any advice on this!
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