Line of Credit to Pay Down Mortgage

[Mike Lambert]

I've been researching using Lines of Credit to pay down a mortgage (this one is for my primary home). I'm interested to get feedback. Please shoot holes in my plan and let me know if you have better ideas.

Hypothetical deets (all numbers are rounded):

30-yr Mortgage: $280k @ 4.8%

Dual net monthly income: $9k

Total monthly expenses: $5k (includes mortgage payment)

(Cash Flow: $4k)

Plan is to use a Line of Credit (18% APR) and pump $15k into the mortgage every 6 months (conservatively paid off in month 4).

Using this approach (per the amortization schedule calculator I have) I will pay off the mortgage in less than 7 years.

I will pay around $11k in Credit Line interest (approx. $700 each 6-month iteration), but will reduce my mortgage interest by over $200k!

I look forward to hearing from you guys (especially the accountants!) Fire away!

Mike

[Gordon French]

hmm.... why? Im missing something. 

If the interest is 18% on the Line of Credit and the interest on the home is 4.8% then don't even think about using a line of credit for that. Take the money you are going to use to pay the line of credit and just apply it to the mortgage. 

Some where you are getting the funds to pay off the line.... To me you can pay the mortgage off faster at 4.8% then at 18%

As for the tax side... The line of credit interest might not be tax deductible. That law changed this year and I would have to speak to my accountant. 

18% what the hell... that is insane and might as well be a credit card. You should be getting 6% to 8%