Refinance HELOC or pay additional to principal each month?
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I have 28 yrs remaining on my first with a balance of $150K @ 5.75% fixed. Payment is only $1100.00/month. My problem is my HELOC now maxed out at $44K @ prime adjustable. I understand now this is basically revolving credit line and that SUCKS. It's not really hurting my credit score (760). But the $300.00/month payment they want is only paying interest and this will never payoff. I'm planning on staying in this house 3-5 years and its appraised at $230K. I make approx $90k/year and figure I can afford to pay approx. $2k/month without a problem.
My best thought was to pay an additional $700.00 to principal on HELOC every month. This will elinate the bad loan in approx 5 years while allowing me access to funds paid back and not committing me to a big monthly payment strictly if emergencies i.e. loss of job occured. It's still a good rate and tax deductible and I don't think I can beat the 5.75% fixed first. When I do pay this off I then plan to continue paying $2k/month towards first.
Refinance HELOC or pay additional to principal each month?That sounds like a good plan with no flaws. Possibly another way to look at it is to take the weighed average cost of interest on both loans, which comes out to about 6.3%. If you think you can get a fixed for less than the 6.3% then you should consider it. Ultimaetly, I think the market is pretty close to the break-even rate, so it may not be worth the hassle. In terms of flexibility, I think you could refi and still have a heloc outstanding, thereby having it as ammo if you need it (just don't get into the same sitiuation again). Your monthly payments by refi-ing should not increase too much (about $300 at 6.5% at 30 year fixed)., so it does not make the payment jump to super high levels.
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