Need Help! Possibly dug myself in a hole with Interest Only Heloc

[Eric DeVito]

Hello all! So i decided on getting a HELCO because I want to get my first investment property and I have equity in my primary residence I live in now. Basically i spoke to TD Bank today and agreed on terms, but I have not signed anything yet. They will send me my application via email. I just want to know if I did the right thing or If I made a mistake and if so can I back out.

Current Home:

Purchase Price = $255,000 (30 year VA Loan /w 4.0 Interest rate. Traditional.)

Downpayment = $50,000

Monthly payment = $1,268

I have been making payments for about 14 months thus far so total money invested about $65,000

Have around $190,000 left to pay.

Property Valued around $310,000.

TD Bank agreement:

58,000 line of credit

$713.00 per month interest then after 10 years Principal kicks in.

Interest rate 3.50 from ($248,000) 190,000 + 58,000 = $248,000 which is how that number came up. 

Had to open a checking account to get a discount for better rate.

$99 free for closing cost and $50 annual fee from 2-9 years.

The rep said I would be saving money long term, but spoke to my accountant and says this is a bad deal. Says I will be paying all interest and no equity in home until after 10 year. Thoughts?

[Ralph R.]

@Eric DeVito Your numbers are flawed somewhere. if you paid $255000 and gave a $50,000 down payment then you borrowed $205,000. that means you still owe $200,774.06 on the house. the reason is of your $1268.00 payment only $978 is for your loan service. the rest is taxes and insurance. Of the $978 loan service on payment number 14 you paid $308.43 to principle and the remaining $670.27 dollars was Interest on the loan. right now and for the next 11 years your interest payment will be higher than your Principle Payment. In Sept of year twelve you will start to go the other way. On the Sept Payment of year 12 you will pay $488 dollars Interest and $489 dollars of Principle. You will reach a $190,000 loan balance in November of year 3. Its true you will not get any equity in your home unless you pay down the HELOC. @Ryan Dossey is right unless you find one heck of a deal your investment will never pay both loans.  I would not attempt this until you have a better understanding of what is and isn't a good deal as well as a basic knowledge of how Loans actually work.  RR