Using a HELOC to pay off my home quickly.

[Blake Schreckhise]

Just heard about a friend of a friend who is using a HELOC with the intention of paying off his home quickly. The basic idea is that you use a HELOC to pay off your original mortgage. Then instead of having your free cash just sit in a savings account making hardly any interest for you, you would sink most of it into paying off the HELOC. From there you would use the HELOC to pay for your living expenses while continuing to put your income into the HELOC.

Trying to explain that quickly, so hope it makes sense. But the basic idea is to lower the amount of principal that you have to pay interest on while you still have access to draw those funds back out to use if necessary.

If you've had any experience with this tactic could you weigh in with the positives and the negatives. It took me a while to understand what was happening but after I got it, it seems to make sense on paper.

[Dave G.]

@Blake Schreckhise I have not had experience doing this, nor will I. I've seen the concept explained and it looks pretty frickin' dumb to me. A lot of financial gymnastics to maybe save a trivial amount of interest. Also exposes the homeowner to risk as the HELOC can be called anytime, and terms can change any time. Also, the interest on a HELOC these days is almost always higher than a fixed rate mortgage.

So IMO it's basically a snake oil pitch to the inexperienced, ignorant and impatient. Recommend you steer clear of it.