Skip to content
×
PRO
Pro Members Get Full Access!
Get off the sidelines and take action in real estate investing with BiggerPockets Pro. Our comprehensive suite of tools and resources minimize mistakes, support informed decisions, and propel you to success.
Advanced networking features
Market and Deal Finder tools
Property analysis calculators
Landlord Command Center
$0
TODAY
$69.00/month when billed monthly.
$32.50/month when billed annually.
7 day free trial. Cancel anytime
Already a Pro Member? Sign in here

Join Over 3 Million Real Estate Investors

Create a free BiggerPockets account to comment, participate, and connect with over 3 million real estate investors.
Use your real name
By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.
The community here is like my own little personal real estate army that I can depend upon to help me through ANY problems I come across.
General Real Estate Investing
All Forum Categories
Followed Discussions
Followed Categories
Followed People
Followed Locations
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback

Updated over 1 year ago,

User Stats

13
Posts
2
Votes
Matthew Adams
2
Votes |
13
Posts

Clarification on article about using a HELOC to build wealth

Matthew Adams
Posted

Hi,

I just read through the article at https://www.biggerpockets.com/blog/how-im-using-helocs-to-build-wealth by Charles Hardage.  I'm unclear on one thing, though. Charles said:

"Our first HELOC allowed us to save $50,000 in principal off our home, which saved $30,000 in interest. We still had to pay interest on the HELOC, but that was only a few thousand dollars over the course of a year. But by using the HELOC, we saved about seven years of mortgage payments on the back end."

So, Charles is saying that he took out a HELOC to pay down his principal? Let's say you have a 30-yr fixed first mortage at, say, 5%, with a current principal of $200,000 after 10-ish years of payments and an original loan amount of $300,000, and you take out a $50,000 HELOC with a 5-yr draw & 20-yr repayment period at, say, 9%. In this scenario, how does that help someone save first mortgage interest and enable them to have capital to nab investment properties?  It strikes me that you're borrowing at 9% to pay down money that you're only paying 5% on, so how does that help you save interest?  Also, how much do you pay on your first mortgage versus how much you use for capital on acquiring real estate?

Appreciate some clarification here.

Loading replies...