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Updated over 5 years ago,
HELOC on rental property offered at 7.98%
I'm been offered a 7.9% 250k HELOC on a multi family property I own free and clear. Property is worth 400 K.
Trying to decide whether this is a good deal. Many of you may say initially that this interest rate is too high; however, think about this. We have 30k of free cash every month we can leave sitting in the HELOC thus reducing any interest rate owned. (Interested is calculated at daily rate not monthly like a traditional amortized mortgage)The goal is to use the HELOC to buy an investment property thus savings on cash out refinance fees and then pay down the HELOC over the course of a year. Then I keep going back to this same HELOC to buy future investment properties, thus continually saving and avoiding cash out refi. fees. I could also use the HELOC to pay down a mortgage I have at 6%. Again, on paper it Seems stupid to take out a loan at a higher interest rate to pay off a loan at a lower interest-rate, but based on the way the interest is calculated on the HELOC I believe that in the long run I would pay much lower interest on the investment property. Does anybody know how I could calculate whether I am making a good decision trying to use HELOC as a financing tool for future investment properties? Or at what point the HELOC interest rate is too high. Thoughts anyone?