Should You Keep Your Home Equity Line of Credit (HELOC) Separate From Your Primary Mortgage?

Should I keep my HELOC separate from my primary mortgage if I used it to purchase a rental property? This video shows more.

Transcript

Hey, folks. I was just asked, "Can you spell trombonist?" The answer is, absolutely not. The other question that we got was, "Should I keep my HELOC separate from my primary mortgage if I used it to purchase a rental property?" One, you shouldn't have a separate mortgage. Again, we're constantly preaching that a mortgage is bad for you. Yes, the only benefit of having a mortgage is your interest rate, not your rate of interest, but your interest rate is locked in. It's not going to change. What do we find out about HELOCs? Those offer fixed rate HELOCs as well. Not only fixed rate, but when rates come down, a lot of these banks are allowing you to unlock your rate and catch the rates coming down, and lock again. You can do that three times over the life of that loan. Now it makes it even more valuable and less risky than a mortgage does. Keep in mind, interest rate only dictates payment. It does not dictate how much interest you actually pay.

There's a new document that came out on October 3rd called the Loan Estimate that combines the Good Faith Estimate and the Truth In Lending. You'll pay attention to page three of the Loan Estimate. It's called TIP, total interest percentage. A lot of your traditional loans are going to have 69 to 90% total interest percentage rate. That is the true amount of interest that you are paying, not your interest rate. Interest rate, again, only dictate the payment.

Back to the question, not the trombonist one, but the one of should you use a home equity line of credit separate from your primary mortgage if used to purchase a rental unit? You could do so, if you're totally risk averse, and you don't like the idea of having a fixed rate HELOC that you can actually unlock and lock again when rates go down, then you can keep a first lien position mortgage and have a second lien position home equity line of credit that you can use to do whatever you wish with. Again, we encourage you to use the equity in your home for assets, cash paying, dividend paying assets, not liabilities. You need to educate yourself on what's an asset and what's a liability. If you like this video, be sure to like here. Subscribe to our channel. Take care, God bless.

You guys are still here? Awesome. Click somewhere on this screen, I'm not really sure where, but I've picked out two more videos that I believe you'll find a lot of value from. Take care, God bless.

[nellielee]

I enjoy your videos but, they are so short I would love if you can go into a little more details on many of your videos. Thanks for sharing!