Using HELOC to pay off Mortgage By Clayton Morris--Legit?

[NA Smith]

Just purchased and read a book by Clayton and Natali Morris, "How to Pay off Your Mortgage In 5 Years". They using a HELOC to pay down principal and using your HELOC as your bank account. I want to know if anyone has done this. The time varies so 5 years is just the title of the book.

[Andrew Postell]

@NA Smith I would be very cautious with this type of a plan. I have not read the book but there are two areas of conern for me: The 10 year maturity date and the adjustable rate. Since HELOCs have adjustable rates they will often catch people off guard when they adjust. With rates moving higher, it is likely that your rate will increase in the future. The 10 year maturity date is where the HELOC will modify into a different product all together. Meaning after opening the HELOC for 10 years it will cease to be a HELOC. It will "mature" into a 20 year fixed rate mortgage that you can no longer draw on. And when is matures the rate will increase again. I've seen typical numbers of 1%-2% higher than your current rate when it adjusts.

Most financial advisers will recommend against having varying interest rate debt....which is exactly what a HELOC is.  Unless you have a very fast method of paying it back you run a very heavy risk of the rate increasing to a place where it could harm you in the long run.

Feel free to tag me if you have any questions.