HELOC sweep accounts

[Jason Theus]

I've been looking for ways to best use a HELOC on paying down my home quicker.

Can anyone who has or is doing a HELOC sweep give me some direction.

[Kathy Henley]

You have equity in a property, right @Jason Theus? Enough that a lender is willing to let you have access to this value in cash. It is called a Home Equity Line of Credit. When you write a check (borrow,) you will eventually have to pay back the money, plus some interest, to the lender. Is your intention to use money from the equity of property A, to pay down a loan on property B? I am uncertain of your method. Does property B have a terribly high interest rate? 

Here is how I used a HELOC of my primary home (California): I wrote checks from the HELOC and used the funds as the down payment to buy a couple of investment properties in another state. Eventually, I sold the primary home, paid off the original loan, the balance due of the HELOC and now live from the income of my new state properties. It was a risk, but California market is crazy. My way of looking at it was to put my equity to work, to invest my equity for building a future of passive income. I am not sure if paying off your loan is putting your equity to work. Tell me more.

[Jason Theus]

@Kathy Henley, exactly what I want to do.

I want to use the equity in my home to buy multiple rentals, I don’t want to pay it off but just quickly bring down the principal.

I was told that a HELOC sweep would be a good way, But how does it work by putting all my income into the HELOC account. Let's just say I want to do a HELOC for $40k @ a 2yr draw. Every 2yrs I'll do $40k. I was told that I need to pay 1.25% on total amount & 4.75 interest on $40k.

[Kathy Henley]

@Jason Theus You want to use the HELOC for a down payment of an investment property, pay off this borrowed money with current income and use it again for another purchase? This is a good plan. It is different from my method because I waited until I sold my primary home. You would pay it off much earlier, paying less interest expense. Please do a search on 'HELOC Sweep', maybe someone wrote about this in more detail. Best, Kathy

[Andrew Postell]

@Kathy Henley what @Jason Theus is describing is a different method that you are describing.

Jason, there have been other posts about the product you are speaking on but I have not wanted to comment on it officially. Using a HELOC to "pay down" another mortgage......well, banks make a TON of money on those types of products. please be very careful when exploring this subject matter. And make sure you know how to calculate payments with a variable rate against payments with a fixed rate loan. I hope what I am alluding to makes sense.

[Jason Theus]

@Kathy Henley, thanks!!!

[Jason Theus]

@Andrew Postell, could go more into detail pls. I want to know as much as I can on the subject.