Establishing a HELOC on primary residence for future investments

[Jeremy Roberts]

I've seen much debate over the true value of a HELOC, but my wife and I went ahead and turned our mortgage into a first position HELOC. Not only do we already have $14k at our fingertips, but we were offered the entire amount at 3.2% fixed for the first year shifting to less that prime rate after that. The payments are $500 month less (mostly due to lack of escrow) than before and we have access to draw on it for 10 years. Are there any recent success stories out there using this strategy?

[Albert Bui]

Originally posted by @Jeremy Roberts:

I've seen much debate over the true value of a HELOC, but my wife and I went ahead and turned our mortgage into a first position HELOC. Not only do we already have $14k at our fingertips, but we were offered the entire amount at 3.2% fixed for the first year shifting to less that prime rate after that. The payments are $500 month less (mostly due to lack of escrow) than before and we have access to draw on it for 10 years. Are there any recent success stories out there using this strategy?

Its successful as long as you're okay with the risks involved with having a floating rate based on prime after your intro rate expires. Usually a heloc operates on Prime + .00 - 1.99% depending on how high in loan to value you went up to on your home (70, 80, 90, 95% LTV) etc since the higher the loan the higher the risk so as always the rate follows that risk upwards.

If you pay significantly more than your monthly HELOC payment like 5-10X you can pay off your mortgage in accelerated fashion by using a first position HELOC. There are strategies around this that are often called pay check parking, but in reality you can park any income/funds you get each month including, rents, interest, wages, salaries, etc into your HELOC to lower your monthly interest due.

Best of luck,