Using 7% HELOC to Pay off a 3% Mortgage?

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Intrigued by the idea of leveraging a 7% Home Equity Line of Credit (HELOC) to pay off a 3% mortgage? In our latest video we delve into the unconventional strategy of utilizing a higher-interest HELOC to eliminate a lower-interest mortgage. Join us as we unravel the complexities of this approach and explore whether it's a savvy financial move or a risky gamble.

Throughout the video, we'll examine the potential benefits and drawbacks of this strategy, shedding light on factors such as interest rates, repayment terms, and overall financial impact. Whether you're a homeowner weighing your debt repayment options or a curious observer seeking to expand your financial knowledge, this discussion promises to offer valuable insights and empower you to make informed decisions about your mortgage strategy. Don't miss out on this thought-provoking exploration that could reshape your approach to debt management and homeownership. #HELOCvsMortgage #DebtManagement #FinancialStrategy #MortgagePayoff #InterestRates #HomeEquityLoan
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**DISCLAIMER** The suggestions, advice, and/or opinions that are given by Sam Kwak and Daniel Kwak (The Kwak Brothers) are simply opinions. There are no guarantees of set outcomes. Listeners, guests, and attendees are advised to always consult with attorneys, accountants, and other licensed professionals when doing a real estate investment transaction. Listeners, guests, and attendees are to hold The Kwak Brothers and its brand harmless from any liabilities and claims. Not all deals will guarantee any profit or benefits. Listeners, guests, and attendees are to view and listen to all materials and contents furnished by the Kwak Brothers as a perspective based on experience.

[saritamoorebansa]

This video is interesting . Listened to your video in its entirety. Sounds just moving debt around. I have paid down 60% of my 3% mortgage by paying additional principal payments working two jobs and watching my spending.

[jjvillian]

I paid off my home in 10 years 2 months.. Threw in any extra money I got, OT from work, tax refund, etc.. But of course I got my home for $154, 000 in 2011.

[winniethepoohandeeyore]

We paid $64, 900 for our 1632 sq ft 3 bedroom 2 bath home in 21, I'm doing just fine overpaying the principal every month starting with $30 a month, then by by $40 a month, Already knocked almost 7 years off the life of the mortgage in 3 years. Next COLA it goes up another $10 a month To $50. My principal on my mortgage is only $125 a month. Already paying way more into principal than interest which is at 2.875%. And it's free, doesn't threaten my house. Wouldn't make sense taking out a HELOC that's double what my current mortgage rate is.

[spinedoc]

If you have $12000 in income and $7000 in expenses where is the calculation comparing just paying $5000 off the mortgage each month vs using the HELOC?? Why not save all the HELOC interest??

[michaelbuckley]

I’ve been debating this concept, and this video is literally my exact thought. Thanks for addressing this topic. 😅

[Timc]

Curious to see the results of running the second position HELOC vs. a First position. Chunking vs. all in options. Thanks for the quality content.

[sdpumas]

From personal experience: i know a heloc is a powerful yet complicated tool. Do as much research as possible before attempting to use it in anyway shape or form. With that being said it can be used in this manner for your advantage.

[FreakyEye]

Great video, However I have a question, wouldn't the mortgage need to be paid off whilst the HELOC is being handled? Or is the mortgage interest factored into the HELOC? If someone could clarify this for me that would be amazing

[missLonaPooh]

I thought getting a HELOC would add an additional payment, but the way you explained it is the mortgage payment gets added onto the HELOC. Does that strategy happen using automatic payments?

[jakeb]

I downloaded the excel sheet but I don’t see the other daily and amortization schedule tabs in it? Is there an updated version…

[shirleysanchez]

I'm trying to fully understand. So on the above example, just by using $20, 000 from the heloc, it will reduce the mtg to 8.5 years? It just has to be done once? Is $20, 000 the first 7 years of interest on the loan ? So for higher loans more Heloc is needed? I need to watch the previous video again. 🧐🤔

[septemberanne]

The thing I don't understand is if you are paying lower interest rate on your mortgage that should be better than heloc at higher rate because while you may have reduced your daily balance on your mortgage therby saving on interest there, you still have to pay back on what you borrowed with the heloc. Problem is it will take time to pay back the heloc so how are you saving money? Won't the interest accumulate on the heloc? Like if you borrowed $20, 000 then obviously you didn't already have the finances to cover that already on your own so lets say you only have a $200 cashflow every month then it seems like it would take forever to pay the heloc and now you higher interest payments on the heloc than you would have on the mortgage. Sure youre saving on money on mortgage interest but its canceled out by interest on heloc? What am I missing?

[karlkaldor]

What if you don't have any extra money to help pay down the heloc? Can you do an example of this working where your monthly expenses plus your P&I payment on your mortgage equals your monthly income?

[JJT]

It sounds like this will increase the amount of your monthly payment. Why not just pay that extra money directly to your mortgage and not get a heloc, it should save you more money.

[janheinemann]

Everyone who believes this doesn’t understand the time value of money. Never use 7% money to pay down a 3% loan when you can use it to earn safe interest at 5% or even invest wisely and earn 8%. This only helps people that would waste (spend) their extra money rather than investing it.

[NeilBrown-bj]

Hello, interesting content... I would love to have a copy of your worksheet to see the effects even though you do not service clients in Canada. Can I get a copy of your excel file still?

[CharlesDixon-lw]

Can u explain to me or show me were a video is of specific things to do with a heloc to pay things off early?

[jaredshowers]

So we would still pay I. The mortgage and heloc at the same time?

[DavidDedman]

if i borrow $20, 000 from the heloc - dont i still have the house payment to pay - so 2 payments?

[umartariq]

Wow can't believe I didn't know about this. Learning so much from you guys, thank you. Can you just help clarify 1 thing?

Which strategy would save more in interest and by how much?

1) pay an extra $1000 each month into the mortgage for 12 months?

Or

2) borrow 12k from my heloc, dump it into my mortgage, dump my pay into heloc biweekly, take out money from heloc to pay my bills. Reduce my balance by 1k a month (cash flow). Rinse and repeat yntil 12k heloc is paid off.

I did some calculations and the difference in the interest saved is negligible. Maybe I am doing something wrong? Any help would be appreciated.