Heloc to pay off mortgage faster

[Drew Cameron]

I recently came across a new strategy that I don't quite understand and it sounds too good to be true. The principal is simple. Use your heloc to pay your mortgage and funnel all your funds in and out of it like a checking account. The interest updates daily so you can pay down principal balance much faster than on a traditional mortgage. With a decreasing principal balance the payments go down each month as you pay it off. Plus you can get rid of other payments by funneling them into your account as well. Has anyone else heard of this? Or has anyone used this successfully?

[Joshua S.]

Originally posted by @Jeremy Z.:

Originally posted by @Joshua S.:

Originally posted by @Chris May:

Originally posted by @Joshua S.:

Originally posted by @Steven D.:

This is really starting to remind me of a story back in college. A friend went to a poker game and we asked him how he did.

Him: "I cashed out for $12 so I won $12."

Me: "What did you buy in for?"

Him: "$30"

Me: "So you lost $18?"

Him: "No I won $12"

Me: "But you bought in for $30 and only cashed out $12 so you lost money????"

Him: "But I cashed out $12 so I won $12."

Me: "Ummmm that's not how math works"

Him: "I won $12"

Yeah, that doesn't make any sense. Neither does this one.

Me: "I'm paying $600 to borrow $10,000 that I'm able to flip and make into $20,000".

Everyone: "OMG, If you pay to make money, you're a sucker! What an idiot! Now get out of my way so I can go spend my money on a rental property and make some money!"

Let me know if you ever find another 100% ROI investment with a $600 fee. I'll take it every time. Cheers.

Your ROI is zero if you use a HELOC.

Ok, one last question since you changed your mind about responding to me. I need your advice on this one.

I was thinking about doing the same thing, but with a zero percent balance transfer from my credit card.

I don't have the $10,000 lying around, so that's not a factor. But I can take $10,000 from the card and there's zero percent interest on it as long as I pay it back in their offer period (12 or 18 months, can't remember), I just have to pay a flat 3% balance transfer fee when I do it.

So, I lump the $10,000 on my mortgage and save a bunch of interest like we have talked about, I just have to pay a flat $300 to do it. If I can save all that interest by paying a flat $300, that's cool, right? I don't see any downside to it at all since the savings more than pays for the $300.

I actually do get what you are trying to argue here, and I want to propose another scenario for you to think about... Instead of using a HELOC at 5% or a credit card at 3%, try just saving that $10,000 over the course of the year and then making a lump sum payment to your mortgage. Do the math. It gives you basically the same result.

Jeremy, I keep telling you guys that yes, you can save and save and put together $10,000, but during the course of the year I'm accruing more and more interest. Speed is part of the advantage of the HELOC strategy, you dump the money on your mortgage right when you get the line of credit, no waiting and accruing interest while you save all year. Then as bills come back up, you can borrow against the HELOC and pay them, but in your scenario, you just need to wait for more income because the $10,000 is gone until you sell or refi.

So, look at it this way:

Saving $10,000.

Pros - No cost / free.

Cons - Slow, lack of liquidity / flexibility.

HELOC $10,000.

Pros - Fast, liquidity / flexibility.

Cons - Nominal cost.

It's literally the same thing, you're just swapping $40/month for some speed and flexibility. But given how much you are saving (thousands and years) either way you choose to go THE $40/MONTH IS MORE THAN PAID FOR WHICH IS WHAT MAKES IT STUPID TO WORRY ABOUT. How can a bunch of investors and financial people be worried about spending $40/month to make it more convenient to save thousands? I am beside myself that no one can get their mind around this. It's crazy.

[Jeremy Z.]

Originally posted by @Joshua S.:

Originally posted by @Jeremy Z.:

Originally posted by @Joshua S.:

Originally posted by @Chris May:

Originally posted by @Joshua S.:

Originally posted by @Steven D.:

This is really starting to remind me of a story back in college. A friend went to a poker game and we asked him how he did.

Him: "I cashed out for $12 so I won $12."

Me: "What did you buy in for?"

Him: "$30"

Me: "So you lost $18?"

Him: "No I won $12"

Me: "But you bought in for $30 and only cashed out $12 so you lost money????"

Him: "But I cashed out $12 so I won $12."

Me: "Ummmm that's not how math works"

Him: "I won $12"

Yeah, that doesn't make any sense. Neither does this one.

Me: "I'm paying $600 to borrow $10,000 that I'm able to flip and make into $20,000".

Everyone: "OMG, If you pay to make money, you're a sucker! What an idiot! Now get out of my way so I can go spend my money on a rental property and make some money!"

Let me know if you ever find another 100% ROI investment with a $600 fee. I'll take it every time. Cheers.

Your ROI is zero if you use a HELOC.

Ok, one last question since you changed your mind about responding to me. I need your advice on this one.

I was thinking about doing the same thing, but with a zero percent balance transfer from my credit card.

I don't have the $10,000 lying around, so that's not a factor. But I can take $10,000 from the card and there's zero percent interest on it as long as I pay it back in their offer period (12 or 18 months, can't remember), I just have to pay a flat 3% balance transfer fee when I do it.

So, I lump the $10,000 on my mortgage and save a bunch of interest like we have talked about, I just have to pay a flat $300 to do it. If I can save all that interest by paying a flat $300, that's cool, right? I don't see any downside to it at all since the savings more than pays for the $300.

I actually do get what you are trying to argue here, and I want to propose another scenario for you to think about... Instead of using a HELOC at 5% or a credit card at 3%, try just saving that $10,000 over the course of the year and then making a lump sum payment to your mortgage. Do the math. It gives you basically the same result.

Jeremy, I keep telling you guys that yes, you can save and save and put together $10,000, but during the course of the year I'm accruing more and more interest. Speed is part of the advantage of the HELOC strategy, you dump the money on your mortgage right when you get the line of credit, no waiting and accruing interest while you save all year. Then as bills come back up, you can borrow against the HELOC and pay them, but in your scenario, you just need to wait for more income because the $10,000 is gone until you sell or refi.

So, look at it this way:

Saving $10,000.

Pros - No cost / free.

Cons - Slow, lack of liquidity / flexibility.

HELOC $10,000.

Pros - Fast, liquidity / flexibility.

Cons - Nominal cost.

It's literally the same thing, you're just swapping $40/month for some speed and flexibility. But given how much you are saving (thousands and years) either way you choose to go THE $40/MONTH IS MORE THAN PAID FOR WHICH IS WHAT MAKES IT STUPID TO WORRY ABOUT. How can a bunch of investors and financial people be worried about spending $40/month to make it more convenient to save thousands? I am beside myself that no one can get their mind around this. It's crazy.

How does the HELOC give you more flexibility? You can only pull out as much cash as you have paid down on it during the year that you are paying it off, correct?

I'm not saying you can't do your method and make it work, just that it is unnecessary and perhaps more work. My question above is genuine, so I hope you respond to it. As frustrating as this back and forth has been at times I have to admit it has been useful for me to think all of this stuff through.

[Jeremy Z.]

Originally posted by @Nick Moriwaki:

Originally posted by @Chris May:

@Nick Moriwaki 

Unfortunately, you didn't do the comparison the that all of us have been discussing. You need to compare a mortgage and a HELOC with the exact same payments made to them. 50k at the beginning, 3k payment every month thereafter.

The thing that makes it impossible to intelligently discuss this is that every proponent of this theory has a different concept of why it works. Ironically, very few argue the ONE variant of this theory that actually does save interest (and is what the bankers behind these products are actually selling).

The comparison that you're referring to is not the scenario that me, Josh, and anyone else who is in favor of the strategy are looking at. That is what I meant when I responded to Josh's initial post that the core misunderstanding is the payment strategy behind putting in the chunk payment using the HELOC. As soon as you folks read "pay mortgage with $X payment from HELOC and save money" you immediately jump to the conclusion we are trying to game daily interest or overlooking that the HELOC accrues interest.

I believe we've said/implied multiple times that the strategy requires additional payment. However, I've tried to make it very clear that there is a very distinct difference in paying additional to a mortgage and paying additional to a HELOC. I'm confused as to how people can contest that. All payments and additional payments to the mortgage cannot be recouped without spending time and fees. The HELOC requires financing fees up front, but since it's a revolving line, all money put into it can come back out immediately. This keeps all your options open for other investments/opportunities that everyone keeps saying they would rather do.

If we’re all on board that paying extra reduces total interest paid, why not choose the most convenient/flexible/efficient way to do so? 

A few people have stated that you can accomplish the same long term interest savings by taking out a HELOC (access to money), but carry a zero balance and instead use your cash to pay down the mortgage. Do you dispute that both methods would accomplish essentially the same thing? It seems to me they would, but I acknowledge that I could be overlooking something.

[Joshua S.]

Originally posted by @Jeremy Z.:

Originally posted by @Joshua S.:

Originally posted by @Jeremy Z.:

Originally posted by @Joshua S.:

Originally posted by @Chris May:

Originally posted by @Joshua S.:

Originally posted by @Steven D.:

This is really starting to remind me of a story back in college. A friend went to a poker game and we asked him how he did.

Him: "I cashed out for $12 so I won $12."

Me: "What did you buy in for?"

Him: "$30"

Me: "So you lost $18?"

Him: "No I won $12"

Me: "But you bought in for $30 and only cashed out $12 so you lost money????"

Him: "But I cashed out $12 so I won $12."

Me: "Ummmm that's not how math works"

Him: "I won $12"

Yeah, that doesn't make any sense. Neither does this one.

Me: "I'm paying $600 to borrow $10,000 that I'm able to flip and make into $20,000".

Everyone: "OMG, If you pay to make money, you're a sucker! What an idiot! Now get out of my way so I can go spend my money on a rental property and make some money!"

Let me know if you ever find another 100% ROI investment with a $600 fee. I'll take it every time. Cheers.

Your ROI is zero if you use a HELOC.

Ok, one last question since you changed your mind about responding to me. I need your advice on this one.

I was thinking about doing the same thing, but with a zero percent balance transfer from my credit card.

I don't have the $10,000 lying around, so that's not a factor. But I can take $10,000 from the card and there's zero percent interest on it as long as I pay it back in their offer period (12 or 18 months, can't remember), I just have to pay a flat 3% balance transfer fee when I do it.

So, I lump the $10,000 on my mortgage and save a bunch of interest like we have talked about, I just have to pay a flat $300 to do it. If I can save all that interest by paying a flat $300, that's cool, right? I don't see any downside to it at all since the savings more than pays for the $300.

I actually do get what you are trying to argue here, and I want to propose another scenario for you to think about... Instead of using a HELOC at 5% or a credit card at 3%, try just saving that $10,000 over the course of the year and then making a lump sum payment to your mortgage. Do the math. It gives you basically the same result.

Jeremy, I keep telling you guys that yes, you can save and save and put together $10,000, but during the course of the year I'm accruing more and more interest. Speed is part of the advantage of the HELOC strategy, you dump the money on your mortgage right when you get the line of credit, no waiting and accruing interest while you save all year. Then as bills come back up, you can borrow against the HELOC and pay them, but in your scenario, you just need to wait for more income because the $10,000 is gone until you sell or refi.

So, look at it this way:

Saving $10,000.

Pros - No cost / free.

Cons - Slow, lack of liquidity / flexibility.

HELOC $10,000.

Pros - Fast, liquidity / flexibility.

Cons - Nominal cost.

It's literally the same thing, you're just swapping $40/month for some speed and flexibility. But given how much you are saving (thousands and years) either way you choose to go THE $40/MONTH IS MORE THAN PAID FOR WHICH IS WHAT MAKES IT STUPID TO WORRY ABOUT. How can a bunch of investors and financial people be worried about spending $40/month to make it more convenient to save thousands? I am beside myself that no one can get their mind around this. It's crazy.

How does the HELOC give you more flexibility? You can only pull out as much cash as you have paid down on it during the year that you are paying it off, correct?

I'm not saying you can't do your method and make it work, just that it is unnecessary and perhaps more work. My question above is genuine, so I hope you respond to it. As frustrating as this back and forth has been at times I have to admit it has been useful for me to think all of this stuff through.

A few people have stated that you can accomplish the same long term interest savings by taking out a HELOC(access to money), but carry a zero balance and instead use your cash to pay down the mortgage. Do you dispute that both methods would accomplish essentially the same thing? It seems to me they would, but I acknowledge that I could be overlooking something.

Well, I have a $20,000 HELOC and only use $10,000 at a time for mortgage payments. You basically use it as a checking account. You put your paycheck in and it goes down to $7000, you pay a bill, it goes up to $7500, you pay another bill, you get another paycheck and so forth. As long as you make more than you spend the balance comes down gradually, but you always have some room on it and your money is always working for you.

The way I think about it is I didn't want to expose my whole mortgage to a variable interest rate and turn the whole thing into a HELOC, so I installed a HELOC on top of my 30 year fixed and moved a portion of the debt to the HELOC. Then I do what I describe above and gradually pay it off and if anything comes up, my discretionary income is working to bring my mortgage interest down, but I can also pull funds out if I need them. That's the flexibility I'm talking about.

I think doing it the other way around defeats the purpose to an extent and I prefer the idea of having actual cash as an emergency fund in case the HELOC gets frozen or something, but I can see a case for doing it that way. One of the main reasons to do it, though, is to use it as a checking account so you can keep a portion of your mortgage debt at a lower average daily balance, which is what I mean by having your money always working for you. If you're going to do it the opposite way it's not the end of the world, but I don't think you're getting all the benefits of the strategy personally.

[Nick Moriwaki]

Originally posted by @Jeremy Z.:

Originally posted by @Nick Moriwaki:

Originally posted by @Chris May:

@Nick Moriwaki 

Unfortunately, you didn't do the comparison the that all of us have been discussing. You need to compare a mortgage and a HELOC with the exact same payments made to them. 50k at the beginning, 3k payment every month thereafter.

The thing that makes it impossible to intelligently discuss this is that every proponent of this theory has a different concept of why it works. Ironically, very few argue the ONE variant of this theory that actually does save interest (and is what the bankers behind these products are actually selling).

The comparison that you're referring to is not the scenario that me, Josh, and anyone else who is in favor of the strategy are looking at. That is what I meant when I responded to Josh's initial post that the core misunderstanding is the payment strategy behind putting in the chunk payment using the HELOC. As soon as you folks read "pay mortgage with $X payment from HELOC and save money" you immediately jump to the conclusion we are trying to game daily interest or overlooking that the HELOC accrues interest.

I believe we've said/implied multiple times that the strategy requires additional payment. However, I've tried to make it very clear that there is a very distinct difference in paying additional to a mortgage and paying additional to a HELOC. I'm confused as to how people can contest that. All payments and additional payments to the mortgage cannot be recouped without spending time and fees. The HELOC requires financing fees up front, but since it's a revolving line, all money put into it can come back out immediately. This keeps all your options open for other investments/opportunities that everyone keeps saying they would rather do.

If we’re all on board that paying extra reduces total interest paid, why not choose the most convenient/flexible/efficient way to do so? 

A few people have stated that you can accomplish the same long term interest savings by taking out a HELOC (access to money), but carry a zero balance and instead use your cash to pay down the mortgage. Do you dispute that both methods would accomplish essentially the same thing? It seems to me they would, but I acknowledge that I could be overlooking something.

No argument here that they would accomplish the same thing. The thing to consider there is limiting your flexibility. If you don't swap the mortgage for the HELOC then you're most likely going to get a HELOC with a small balance in second position (unless you have a lot of equity built up).

Think of how this would limit you in the future if wanted to invest in another property and only had, say, a HELOC which you can draw $20K but a zeroed out bank account. You would have to refinance the mortgage or stop making the additionally payments, which eat into all the money you saved on interest.

Now look at the scenario I laid out in my spreadsheet.  At any point in time you would have access to at least the $50K deposited from the bank account.  So whenever that opportunity arises, you would be ready to take advantage while still reaping the benefits of having all your money reducing the interest paid on the loan. 

Long story short, if your only goal is to pay off your mortgage while accruing the least interest, then yes, the scenario you laid out is the same (a little better actually if you account for HELOC loan origination fees). But if you want to do anything with that saved money, you're much better off using the scenario I laid out in the spreadsheet.

[Joshua S.]

Originally posted by @Chris May:

Originally posted by @Mike V.:

@Steven D. didn’t you know that’s why he’s here! To preach the gospel. 

I sincerely believe he’s trolling us. No one is this dense... 

 This is extremely cynical, but I've actually wondered if he's actually David Dachtera, the guy who was beating the same dead horse when we went through this years ago.

The way they word their arguments is nearly identical. I even remember David saying "we better let Microsoft know Excel is calculating interest wrong" similar to the Bankrate calculator argument from Josh. David also similarly refused to post any detailed spreadsheets showing his math.

David was selling this system as part of his financial literacy seminar. Funny thing is... I think he finally realized he was wrong, but couldn't admit it because his identity was tied to it being true. 

Nope, I'm me. But speaking of the Bankrate thing, this recurring theme of, "we're all professionals, I can't believe you think you know better", etc. is amazingly hypocritical considering your willingness to turn around and ignore an actual financial calculator in lieu of your own math because you know better. 

I don't speak in equations, but I also don't try to claim some academic high ground while I ignore trustworthy online financial tools like Bankrate and Quicken. Woot woot. :-D

[Joshua S.]

Originally posted by @Nick Moriwaki:

Originally posted by @Jeremy Z.:

Originally posted by @Nick Moriwaki:

Originally posted by @Chris May:

@Nick Moriwaki 

Unfortunately, you didn't do the comparison the that all of us have been discussing. You need to compare a mortgage and a HELOC with the exact same payments made to them. 50k at the beginning, 3k payment every month thereafter.

The thing that makes it impossible to intelligently discuss this is that every proponent of this theory has a different concept of why it works. Ironically, very few argue the ONE variant of this theory that actually does save interest (and is what the bankers behind these products are actually selling).

The comparison that you're referring to is not the scenario that me, Josh, and anyone else who is in favor of the strategy are looking at. That is what I meant when I responded to Josh's initial post that the core misunderstanding is the payment strategy behind putting in the chunk payment using the HELOC. As soon as you folks read "pay mortgage with $X payment from HELOC and save money" you immediately jump to the conclusion we are trying to game daily interest or overlooking that the HELOC accrues interest.

I believe we've said/implied multiple times that the strategy requires additional payment. However, I've tried to make it very clear that there is a very distinct difference in paying additional to a mortgage and paying additional to a HELOC. I'm confused as to how people can contest that. All payments and additional payments to the mortgage cannot be recouped without spending time and fees. The HELOC requires financing fees up front, but since it's a revolving line, all money put into it can come back out immediately. This keeps all your options open for other investments/opportunities that everyone keeps saying they would rather do.

If we’re all on board that paying extra reduces total interest paid, why not choose the most convenient/flexible/efficient way to do so? 

A few people have stated that you can accomplish the same long term interest savings by taking out a HELOC (access to money), but carry a zero balance and instead use your cash to pay down the mortgage. Do you dispute that both methods would accomplish essentially the same thing? It seems to me they would, but I acknowledge that I could be overlooking something.

No argument here that they would accomplish the same thing. The thing to consider there is limiting your flexibility. If you don't swap the mortgage for the HELOC then you're most likely going to get a HELOC with a small balance in second position (unless you have a lot of equity built up).

Think of how this would limit you in the future if wanted to invest in another property and only had, say, a HELOC which you can draw $20K but a zeroed out bank account. You would have to refinance the mortgage or stop making the additionally payments, which eat into all the money you saved on interest.

Now look at the scenario I laid out in my spreadsheet.  At any point in time you would have access to at least the $50K deposited from the bank account.  So whenever that opportunity arises, you would be ready to take advantage while still reaping the benefits of having all your money reducing the interest paid on the loan. 

Long story short, if your only goal is to pay off your mortgage while accruing the least interest, then yes, the scenario you laid out is the same (a little better actually if you account for HELOC loan origination fees). But if you want to do anything with that saved money, you're much better off using the scenario I laid out in the spreadsheet.

FYI - I've heard you guys mention origination fees and stuff and meant to mention this. Mine were waived as long as I keep it open for 3 years, so it's most likely a non-factor depending on your area of the country and stuff.

[Chris May]

Originally posted by @Nick Moriwaki:

"If you don't swap the mortgage for the HELOC then you're most likely going to get a HELOC with a small balance in second position (unless you have a lot of equity built up)."

How does this strategy help you get a higher credit line on your HELOC? How does it change whether your HELOC is in first or second position?

[Nick Moriwaki]

@Jeremy Z. - Josh touched on the difference between my strategy and his. Both use HELOCs, but his is more conservative. If all hell breaks loose and interest rates go through the roof, he can ditch the HELOC and resume his mortgage payments. In the meantime, though, he saved all that extra money by making the chunk payments and then applying all his cash flow to limiting the interest that accrues on the HELOC.

If interest rates on the HELOC stay relatively the same, then my strategy will pay less interest because I'm doing the same thing with the biggest chunk I could possibly take out of it. And as we've discussed before, more money applied = less interest paid.

As a side note, I'm pretty sure HELOCs (at least in Hawaii) have a clause that says they can only go up so much from year to year and have a cap based on the starting interest rate.  This doesn't make it bulletproof, but it lowers the risk a little.  

[Nick Moriwaki]

Originally posted by @Chris May:

Originally posted by @Nick Moriwaki:

"If you don't swap the mortgage for the HELOC then you're most likely going to get a HELOC with a small balance in second position (unless you have a lot of equity built up)."

How does this strategy help you get a higher credit line on your HELOC? How does it change whether your HELOC is in first or second position?

Because the HELOC replaces the mortgage?

$200K mortgage (1st position) at 5% --> $200K HELOC (1st position) at 5% with no mortgage. Dump the $50K in and you start with a balance of $150K with the ability to draw up to $50K at anytime.

[Chris May]

Originally posted by @Joshua S.:

Originally posted by @Chris May:

Originally posted by @Mike V.:

@Steven D. didn’t you know that’s why he’s here! To preach the gospel. 

I sincerely believe he’s trolling us. No one is this dense... 

 This is extremely cynical, but I've actually wondered if he's actually David Dachtera, the guy who was beating the same dead horse when we went through this years ago.

The way they word their arguments is nearly identical. I even remember David saying "we better let Microsoft know Excel is calculating interest wrong" similar to the Bankrate calculator argument from Josh. David also similarly refused to post any detailed spreadsheets showing his math.

David was selling this system as part of his financial literacy seminar. Funny thing is... I think he finally realized he was wrong, but couldn't admit it because his identity was tied to it being true. 

Nope, I'm me. But speaking of the Bankrate thing, this recurring theme of, "we're all professionals, I can't believe you think you know better", etc. is amazingly hypocritical considering your willingness to turn around and ignore an actual financial calculator in lieu of your own math because you know better. 

I don't speak in equations, but I also don't try to claim some academic high ground while I ignore trustworthy online financial tools like Bankrate and Quicken. Woot woot. :-D

I literally wrote the book on balance sheet auditing at a Fortune 50 company. I'm currently a programmer writing code that performs tens of millions of business calculations a day.

But sure. You know better.

Hint: it's not the calculator that's wrong, you're using it incorrectly. Show me a calculator that factors in the cost of the HELOC. Then we'll talk.

Bye.

[Chris May]

Originally posted by @Nick Moriwaki:

Originally posted by @Chris May:

Originally posted by @Nick Moriwaki:

"If you don't swap the mortgage for the HELOC then you're most likely going to get a HELOC with a small balance in second position (unless you have a lot of equity built up)."

How does this strategy help you get a higher credit line on your HELOC? How does it change whether your HELOC is in first or second position?

Because the HELOC replaces the mortgage?

$200K mortgage (1st position) at 5% --> $200K HELOC (1st position) at 5% with no mortgage. Dump the $50K in and you start with a balance of $150K with the ability to draw up to $50K at anytime.

Have you done this? There's a bank that let you swap a mortgage for a HELOC? What LTV?

As I said, this scenario does actually give you more flexibility for putting your paid-down principal into other investments. I'm curious what bank you're doing this with. I've never heard of a bank swapping a mortgage for a credit line.

It still doesn't impact the interest you pay, which was the entire point of this thread... so I'm still confused why you're saying this method "works"

[Joshua S.]

Originally posted by @Chris May:

Originally posted by @Joshua S.:

Originally posted by @Chris May:

Originally posted by @Mike V.:

@Steven D. didn’t you know that’s why he’s here! To preach the gospel. 

I sincerely believe he’s trolling us. No one is this dense... 

 This is extremely cynical, but I've actually wondered if he's actually David Dachtera, the guy who was beating the same dead horse when we went through this years ago.

The way they word their arguments is nearly identical. I even remember David saying "we better let Microsoft know Excel is calculating interest wrong" similar to the Bankrate calculator argument from Josh. David also similarly refused to post any detailed spreadsheets showing his math.

David was selling this system as part of his financial literacy seminar. Funny thing is... I think he finally realized he was wrong, but couldn't admit it because his identity was tied to it being true. 

Nope, I'm me. But speaking of the Bankrate thing, this recurring theme of, "we're all professionals, I can't believe you think you know better", etc. is amazingly hypocritical considering your willingness to turn around and ignore an actual financial calculator in lieu of your own math because you know better. 

I don't speak in equations, but I also don't try to claim some academic high ground while I ignore trustworthy online financial tools like Bankrate and Quicken. Woot woot. :-D

I literally wrote the book on balance sheet auditing at a Fortune 50 company. I'm currently a programmer writing code that performs tens of millions of business calculations a day.

But sure. You know better.

Hint: it's not the calculator that's wrong, you're using it incorrectly. Show me a calculator that factors in the cost of the HELOC. Then we'll talk.

Bye.

We agreed it was $40/month like 12 times... hahahaha. WOW. Bye.

[Nick Moriwaki]

Originally posted by @Chris May:

Originally posted by @Nick Moriwaki:

Originally posted by @Chris May:

Originally posted by @Nick Moriwaki:

"If you don't swap the mortgage for the HELOC then you're most likely going to get a HELOC with a small balance in second position (unless you have a lot of equity built up)."

How does this strategy help you get a higher credit line on your HELOC? How does it change whether your HELOC is in first or second position?

Because the HELOC replaces the mortgage?

$200K mortgage (1st position) at 5% --> $200K HELOC (1st position) at 5% with no mortgage. Dump the $50K in and you start with a balance of $150K with the ability to draw up to $50K at anytime.

Have you done this? There's a bank that let you swap a mortgage for a HELOC? What LTV?

As I said, this scenario does actually give you more flexibility for putting your paid-down principal into other investments. I'm curious what bank you're doing this with. I've never heard of a bank swapping a mortgage for a credit line.

It still doesn't impact the interest you pay, which was the entire point of this thread... so I'm still confused why you're saying this method "works"

Yes, a few times actually. As high as 90% LTV, but some banks only allow 80% and others reduce this if it's an investment property. Also, as previously mentioned, banks will sometimes waive the origination fees and only charge you if you close early. In Hawaii, the requirements are <$250K and that it does not require an appraisal.

The reason you've probably never heard of it is because no one wants to implement the strategy - just look at all the negativity as soon as people see "HELOC" in the same sentence as "saving money".

And as I said before, you've been disproving scenarios that I don't believe any of us are saying. The conversation keeps getting derailed because everyone keeps trying to turn the orange into an apple so everyone pays the same thing. But that is not how the world works. Some people pay a set amount extra every month. Some pay sporadically when they feel like they feel like they can spare the money. And others pay the minimum so they can have the most liquid assets to utilize in the future. Either way, if you were to compare all of these strategies, they would all pay different amounts of interest and could be argued for or against based on each individual's risk tolerance and future intentions. The HELOC strategy is just another method to be added to the mix that provides both the interest savings and the flexibility to pursue future investments.

[Jeremy Z.]

@Chris May

Can you help me read/understand the example in your original model from page 2? Does it account for any money paid into the HELOC that is NOT later put toward your mortgage? Like if a $5,000 paycheck was deposited in Week 1 of the month, and then $1,500 in personal expenses were paid from the HELOC in Week 4.

I'm assuming the spreadsheet you link to in page 2 is the most recent model of yours, so let me know if I am missing an update since then.

[Mike V.]

The wheels on the bus go round and round... round and round... round and round... lol

I’m glad you guys found a strategy that makes you happy.  strategies that make me happy also make me money. If your strategy is to take money out of the big piggy bank and move it into the little one, and that makes you feel ‘richer’ then I’m happy for ya. 

Perhaps it’ll click in 20 years when you’re looking at those bank statements and wonder what happened. 

As entertaining as this has been, I’m done with this thread. Go ahead and call it a win for ya. It sounds like you need a win here, and you’ve already gone too far to realize it was all a mistake. 

[Joshua S.]

Originally posted by @Nick Moriwaki:

Originally posted by @Chris May:

Originally posted by @Nick Moriwaki:

Originally posted by @Chris May:

Originally posted by @Nick Moriwaki:

"If you don't swap the mortgage for the HELOC then you're most likely going to get a HELOC with a small balance in second position (unless you have a lot of equity built up)."

How does this strategy help you get a higher credit line on your HELOC? How does it change whether your HELOC is in first or second position?

Because the HELOC replaces the mortgage?

$200K mortgage (1st position) at 5% --> $200K HELOC (1st position) at 5% with no mortgage. Dump the $50K in and you start with a balance of $150K with the ability to draw up to $50K at anytime.

Have you done this? There's a bank that let you swap a mortgage for a HELOC? What LTV?

As I said, this scenario does actually give you more flexibility for putting your paid-down principal into other investments. I'm curious what bank you're doing this with. I've never heard of a bank swapping a mortgage for a credit line.

It still doesn't impact the interest you pay, which was the entire point of this thread... so I'm still confused why you're saying this method "works"

Yes, a few times actually. As high as 90% LTV, but some banks only allow 80% and others reduce this if it's an investment property. Also, as previously mentioned, banks will sometimes waive the origination fees and only charge you if you close early. In Hawaii, the requirements are <$250K and that it does not require an appraisal.

The reason you've probably never heard of it is because no one wants to implement the strategy - just look at all the negativity as soon as people see "HELOC" in the same sentence as "saving money".

And as I said before, you've been disproving scenarios that I don't believe any of us are saying. The conversation keeps getting derailed because everyone keeps trying to turn the orange into an apple so everyone pays the same thing. But that is not how the world works. Some people pay a set amount extra every month. Some pay sporadically when they feel like they feel like they can spare the money. And others pay the minimum so they can have the most liquid assets to utilize in the future. Either way, if you were to compare all of these strategies, they would all pay different amounts of interest and could be argued for or against based on each individual's risk tolerance and future intentions. The HELOC strategy is just another method to be added to the mix that provides both the interest savings and the flexibility to pursue future investments.

But, Nick, the HELOC strategy doesn't offer any savings because it costs as much as it saves. The Bankrate and Quicken calculators both say that you save $100,000 and 20 years off of your loan paying an extra chunk per year, but the HELOC also COSTS $100,000 in interest, so it's a wash.

You pay $40/month on HELOC interest and have it for 2500 months, so that costs a total of $100,000 in interest and the costs cancel out the savings. No one knows what you're talking about or why you're trying to keep this HELOC for 200 years, my brother, so tell your story walkin'. We're not buying it.

[Chris May]

Originally posted by @Nick Moriwaki:

Originally posted by @Chris May:

Originally posted by @Nick Moriwaki:

Originally posted by @Chris May:

Originally posted by @Nick Moriwaki:

"If you don't swap the mortgage for the HELOC then you're most likely going to get a HELOC with a small balance in second position (unless you have a lot of equity built up)."

How does this strategy help you get a higher credit line on your HELOC? How does it change whether your HELOC is in first or second position?

Because the HELOC replaces the mortgage?

$200K mortgage (1st position) at 5% --> $200K HELOC (1st position) at 5% with no mortgage. Dump the $50K in and you start with a balance of $150K with the ability to draw up to $50K at anytime.

Have you done this? There's a bank that let you swap a mortgage for a HELOC? What LTV?

As I said, this scenario does actually give you more flexibility for putting your paid-down principal into other investments. I'm curious what bank you're doing this with. I've never heard of a bank swapping a mortgage for a credit line.

It still doesn't impact the interest you pay, which was the entire point of this thread... so I'm still confused why you're saying this method "works"

Yes, a few times actually. As high as 90% LTV, but some banks only allow 80% and others reduce this if it's an investment property. Also, as previously mentioned, banks will sometimes waive the origination fees and only charge you if you close early. In Hawaii, the requirements are <$250K and that it does not require an appraisal.

The reason you've probably never heard of it is because no one wants to implement the strategy - just look at all the negativity as soon as people see "HELOC" in the same sentence as "saving money".

And as I said before, you've been disproving scenarios that I don't believe any of us are saying. The conversation keeps getting derailed because everyone keeps trying to turn the orange into an apple so everyone pays the same thing. But that is not how the world works. Some people pay a set amount extra every month. Some pay sporadically when they feel like they feel like they can spare the money. And others pay the minimum so they can have the most liquid assets to utilize in the future. Either way, if you were to compare all of these strategies, they would all pay different amounts of interest and could be argued for or against based on each individual's risk tolerance and future intentions. The HELOC strategy is just another method to be added to the mix that provides both the interest savings and the flexibility to pursue future investments.

I still unequivocally disagree that there are any savings to be had going with a HELOC vs mortgage.

This is the original question:

"Use your heloc to pay your mortgage and funnel all your funds in and out of it like a checking account. The interest updates daily so you can pay down principal balance much faster than on a traditional mortgage."

The supposed difference on interest calculation is what basically everyone is arguing for. You're pretty much the only one just saying "a HELOC is more flexible but doesn't result in less interest paid" (although you have also argued that... but I'll leave it for now).

HELOC as a more flexible loan than a mortgage--totally on board.

HELOC as a way to save on interest expense vs a mortgage? Nope.

[Jeremy Z.]

Originally posted by @Joshua S.:

Originally posted by @Nick Moriwaki:

Originally posted by @Chris May:

Originally posted by @Nick Moriwaki:

Originally posted by @Chris May:

Originally posted by @Nick Moriwaki:

"If you don't swap the mortgage for the HELOC then you're most likely going to get a HELOC with a small balance in second position (unless you have a lot of equity built up)."

How does this strategy help you get a higher credit line on your HELOC? How does it change whether your HELOC is in first or second position?

Because the HELOC replaces the mortgage?

$200K mortgage (1st position) at 5% --> $200K HELOC (1st position) at 5% with no mortgage. Dump the $50K in and you start with a balance of $150K with the ability to draw up to $50K at anytime.

Have you done this? There's a bank that let you swap a mortgage for a HELOC? What LTV?

As I said, this scenario does actually give you more flexibility for putting your paid-down principal into other investments. I'm curious what bank you're doing this with. I've never heard of a bank swapping a mortgage for a credit line.

It still doesn't impact the interest you pay, which was the entire point of this thread... so I'm still confused why you're saying this method "works"

Yes, a few times actually. As high as 90% LTV, but some banks only allow 80% and others reduce this if it's an investment property. Also, as previously mentioned, banks will sometimes waive the origination fees and only charge you if you close early. In Hawaii, the requirements are <$250K and that it does not require an appraisal.

The reason you've probably never heard of it is because no one wants to implement the strategy - just look at all the negativity as soon as people see "HELOC" in the same sentence as "saving money".

And as I said before, you've been disproving scenarios that I don't believe any of us are saying. The conversation keeps getting derailed because everyone keeps trying to turn the orange into an apple so everyone pays the same thing. But that is not how the world works. Some people pay a set amount extra every month. Some pay sporadically when they feel like they feel like they can spare the money. And others pay the minimum so they can have the most liquid assets to utilize in the future. Either way, if you were to compare all of these strategies, they would all pay different amounts of interest and could be argued for or against based on each individual's risk tolerance and future intentions. The HELOC strategy is just another method to be added to the mix that provides both the interest savings and the flexibility to pursue future investments.

But, Nick, the HELOC strategy doesn't offer any savings because it costs as much as it saves. The Bankrate and Quicken calculators both say that you save $100,000 and 20 years off of your loan paying an extra chunk per year, but the HELOC also COSTS $100,000 in interest, so it's a wash.

You pay $40/month on HELOC interest and have it for 2500 months, so that costs a total of $100,000 in interest and the costs cancel out the savings. No one knows what you're talking about or why you're trying to keep this HELOC for 200 years, my brother, so tell your story walkin'. We're not buying it.

 You are grossly misinterpreting what people are saying to you in this regard.

[Joshua S.]

Originally posted by @Jeremy Z.:

Originally posted by @Joshua S.:

Originally posted by @Nick Moriwaki:

Originally posted by @Chris May:

Originally posted by @Nick Moriwaki:

Originally posted by @Chris May:

Originally posted by @Nick Moriwaki:

"If you don't swap the mortgage for the HELOC then you're most likely going to get a HELOC with a small balance in second position (unless you have a lot of equity built up)."

How does this strategy help you get a higher credit line on your HELOC? How does it change whether your HELOC is in first or second position?

Because the HELOC replaces the mortgage?

$200K mortgage (1st position) at 5% --> $200K HELOC (1st position) at 5% with no mortgage. Dump the $50K in and you start with a balance of $150K with the ability to draw up to $50K at anytime.

Have you done this? There's a bank that let you swap a mortgage for a HELOC? What LTV?

As I said, this scenario does actually give you more flexibility for putting your paid-down principal into other investments. I'm curious what bank you're doing this with. I've never heard of a bank swapping a mortgage for a credit line.

It still doesn't impact the interest you pay, which was the entire point of this thread... so I'm still confused why you're saying this method "works"

Yes, a few times actually. As high as 90% LTV, but some banks only allow 80% and others reduce this if it's an investment property. Also, as previously mentioned, banks will sometimes waive the origination fees and only charge you if you close early. In Hawaii, the requirements are <$250K and that it does not require an appraisal.

The reason you've probably never heard of it is because no one wants to implement the strategy - just look at all the negativity as soon as people see "HELOC" in the same sentence as "saving money".

And as I said before, you've been disproving scenarios that I don't believe any of us are saying. The conversation keeps getting derailed because everyone keeps trying to turn the orange into an apple so everyone pays the same thing. But that is not how the world works. Some people pay a set amount extra every month. Some pay sporadically when they feel like they feel like they can spare the money. And others pay the minimum so they can have the most liquid assets to utilize in the future. Either way, if you were to compare all of these strategies, they would all pay different amounts of interest and could be argued for or against based on each individual's risk tolerance and future intentions. The HELOC strategy is just another method to be added to the mix that provides both the interest savings and the flexibility to pursue future investments.

But, Nick, the HELOC strategy doesn't offer any savings because it costs as much as it saves. The Bankrate and Quicken calculators both say that you save $100,000 and 20 years off of your loan paying an extra chunk per year, but the HELOC also COSTS $100,000 in interest, so it's a wash.

You pay $40/month on HELOC interest and have it for 2500 months, so that costs a total of $100,000 in interest and the costs cancel out the savings. No one knows what you're talking about or why you're trying to keep this HELOC for 200 years, my brother, so tell your story walkin'. We're not buying it.

 You are grossly misinterpreting what people are saying to you in this regard.

No, I'm really not. Here's what matters. How much you are saving / making. How much you are paying to get that return.

Chris just agreed that the calculators are correct except that they don't account for the HELOC cost. But we've gone over and over the cost at roughly $40/month. So, I am saving $100,000 and paying $40/month over ten years ($4800). Everyone is busy talking about swapping one debt for another and trying to calculate rates and blah blah. But if we agree that the calculator is correct and that paying additional principal saves interest, but can't see paying $4800 to get $100,000 savings, that is bonkers. You tell me what I'm missing. Tell me which part is wrong with the above statement. Is the calculator wrong about how much you will save or is the cost of the HELOC wrong? For this to be wrong, one of those pieces has to be wrong, so which is it?

[Chris May]

Originally posted by @Jeremy Z.:

@Chris May

Can you help me read/understand the example in your original model from page 2? Does it account for any money paid into the HELOC that is NOT later put toward your mortgage? Like if a $5,000 paycheck was deposited in Week 1 of the month, and then $1,500 in personal expenses were paid from the HELOC in Week 4.

I'm assuming the spreadsheet you link to in page 2 is the most recent model of yours, so let me know if I am missing an update since then.

Jeremy - There are a million variants of this strategy, but virtually all boil down to using the HELOC to pay "chunks" towards your HELOC, then paying the HELOC down over XX months, then doing it again.

Columns O:Z show the variant I just mentioned. Columns H:M show the same payments that are made to the HELOC in Scenario 1, but applied directly to a mortgage instead.

What you're discussing, is the one variant of this model that truly does result in interest savings. I modeled that out on a different thread. I can't find it right now. The interest savings there are a result of gaming the average daily balance formula. The savings are minimal though and boil down to the equation:

r * (ADB - ending balance) = savings

So, in your example, let's assume the HELOC balance is 5,000 on day 1. And also on day one you deposit your $5000 paycheck. ADB would be $450. Ending balance is $1500.

So your interest savings vs just applying the 3500 (5000 - 1500) directly to the mortgage is:

.05 / 12 * ( 450 - 1500) = .05 / 12 * (-1050) = $4.38 savings for the month

So... that one strategy "works". But it's really not very impressive.

[Nick Moriwaki]

Originally posted by @Chris May:

Originally posted by @Nick Moriwaki:

Originally posted by @Chris May:

Originally posted by @Nick Moriwaki:

Originally posted by @Chris May:

Originally posted by @Nick Moriwaki:

"If you don't swap the mortgage for the HELOC then you're most likely going to get a HELOC with a small balance in second position (unless you have a lot of equity built up)."

How does this strategy help you get a higher credit line on your HELOC? How does it change whether your HELOC is in first or second position?

Because the HELOC replaces the mortgage?

$200K mortgage (1st position) at 5% --> $200K HELOC (1st position) at 5% with no mortgage. Dump the $50K in and you start with a balance of $150K with the ability to draw up to $50K at anytime.

Have you done this? There's a bank that let you swap a mortgage for a HELOC? What LTV?

As I said, this scenario does actually give you more flexibility for putting your paid-down principal into other investments. I'm curious what bank you're doing this with. I've never heard of a bank swapping a mortgage for a credit line.

It still doesn't impact the interest you pay, which was the entire point of this thread... so I'm still confused why you're saying this method "works"

Yes, a few times actually. As high as 90% LTV, but some banks only allow 80% and others reduce this if it's an investment property. Also, as previously mentioned, banks will sometimes waive the origination fees and only charge you if you close early. In Hawaii, the requirements are <$250K and that it does not require an appraisal.

The reason you've probably never heard of it is because no one wants to implement the strategy - just look at all the negativity as soon as people see "HELOC" in the same sentence as "saving money".

And as I said before, you've been disproving scenarios that I don't believe any of us are saying. The conversation keeps getting derailed because everyone keeps trying to turn the orange into an apple so everyone pays the same thing. But that is not how the world works. Some people pay a set amount extra every month. Some pay sporadically when they feel like they feel like they can spare the money. And others pay the minimum so they can have the most liquid assets to utilize in the future. Either way, if you were to compare all of these strategies, they would all pay different amounts of interest and could be argued for or against based on each individual's risk tolerance and future intentions. The HELOC strategy is just another method to be added to the mix that provides both the interest savings and the flexibility to pursue future investments.

I still unequivocally disagree that there are any savings to be had going with a HELOC vs mortgage.

This is the original question:

"Use your heloc to pay your mortgage and funnel all your funds in and out of it like a checking account. The interest updates daily so you can pay down principal balance much faster than on a traditional mortgage."

The supposed difference on interest calculation is what basically everyone is arguing for. You're pretty much the only one just saying "a HELOC is more flexible but doesn't result in less interest paid" (although you have also argued that... but I'll leave it for now).

HELOC as a more flexible loan than a mortgage--totally on board.

HELOC as a way to save on interest expense vs a mortgage? Nope.

I'm on board that the interest calculated is the same.  Once we get past that, isn't that where the debate begins?  I guess I can wait until you finish insulting each other if that helps, but I don't see why you would try to keep steering me to an argument that I agree with you on.  

How is what the original post said not what I am describing? Just look at the spreadsheet - my checking account is my HELOC. That's why the bank account stays at 0. My available money is what I can pull from my HELOC, not what's in my bank account. Because the interest is calculated daily, I can pay down principal much faster than a traditional mortgage. Seems like this is perfectly in line with what was originally posted.

My point is that you can save more interest than conventional mortgage paydown strategies, which people keep saying they would rather do. You've argued that the full conversion to the HELOC is the same as doing the same with a mortgage. Interest savings wise, yes. Risk wise, not even close. Aside from the fact that it not even possible, except on a spreadsheet to execute, the concept of someone emptying their bank account and then taking their paycheck and dumping that into their mortgage every month is not something I can comprehend. Shouldn't a valid counter-argument be one that is actually realistic?

[Jeremy Z.]

Originally posted by @Chris May:

Originally posted by @Jeremy Z.:

@Chris May

Can you help me read/understand the example in your original model from page 2? Does it account for any money paid into the HELOC that is NOT later put toward your mortgage? Like if a $5,000 paycheck was deposited in Week 1 of the month, and then $1,500 in personal expenses were paid from the HELOC in Week 4.

I'm assuming the spreadsheet you link to in page 2 is the most recent model of yours, so let me know if I am missing an update since then.

Jeremy - There are a million variants of this strategy, but virtually all boil down to using the HELOC to pay "chunks" towards your HELOC, then paying the HELOC down over XX months, then doing it again.

Columns O:Z show the variant I just mentioned. Columns H:M show the same payments that are made to the HELOC in Scenario 1, but applied directly to a mortgage instead.

What you're discussing, is the one variant of this model that truly does result in interest savings. I modeled that out on a different thread. I can't find it right now. The interest savings there are a result of gaming the average daily balance formula. The savings are minimal though and boil down to the equation:

r * (ADB - ending balance) = savings

So, in your example, let's assume the HELOC balance is 5,000 on day 1. And also on day one you deposit your $5000 paycheck. ADB would be $450. Ending balance is $1500.

So your interest savings vs just applying the 3500 (5000 - 1500) directly to the mortgage is:

.05 / 12 * ( 450 - 1500) = .05 / 12 * (-1050) = $4.38 savings for the month

So... that one strategy "works". But it's really not very impressive.

Thank you for the explanation. I assumed it wasn't accounting for that, but I wanted to make sure I was reading it correctly.

I think the informed people who really advocate for this method are almost entirely focused on the average daily balance portion. And I would imagine if you are the type who likes to have a significant rainy day fund (checking), you could probably do some damage by moving it into a HELOC and using it as your checking account. I need to work up the numbers, but I imagine it could be significant. Why not let it save you on interest rather than earn nothing or next to nothing in checking? Maybe it is less significant then I am thinking though, and therefore not worth the effort or potential extra costs.

I agree that there is a lot of misinformation that gets thrown around on this topic.

[Chris May]

Nick - I'm glad we're having an actual conversation now. Not to derail the progress, but... not one of the other people on here advocating for the HELOC-to-pay-morgage-fast concept are making the same argument as you. It's a total mixed bag. If you want to use your HELOC as a checking account as a forced financial discipline tool, that's a perfectly fine opinion to throw into the mix. The point that Josh, David, etc were making is that the mere act of transferring money to the HELOC saves interest. You're all having different discussions which is why this debate is like whack-a-mole. I said you were debating risk-weighted strategies, and not the interest debate. My point was you were discussing the pros and cons of HELOCs vs a mortgage... the others weren't even at that point.

Now, I think I'm clearer on what your strategy is. But when you say things like "Because the interest is calculated daily, I can pay down principal much faster than a traditional mortgage," I can't help but think you're still sorta advocating the "HELOC saves interest" philosophy. This is exactly the point the original poster was asking about... if the daily interest calculation on a HELOC saves you interest.

And the answer is that it can, a little bit. It's really immaterial though. 

So... can you see why I'm confused? I get your point about HELOC flexibility, but it seems like you have one foot in the door of the "interest savers" camp. The savings from the daily interest calculation is like $5 per month based on all the examples we've run. What your spreadsheet was showing was "put all your remaining disposable income against the loan (and an additional $50k)".

[Justin H.]

Originally posted by @Joshua S.:

You tell me what I'm missing. 

You tell me. I just ran the same numbers you did through the Quicken Loans calculator and came up with wildly different results. Lets use your Quicken Loans calculator example of $200k mortgage @ 4% interest plus a $20k available HELOC @ 4% interest.

.

Scenario 1 - The HELOC Method: Your mortgage would look like this...

But you also need to add the HELOC repayment to your monthly costs, which means repaying $10k @ 4% within 1 year, looks for the first 11 years would look like this each year...

Now since you'll be making one final $10k payment right before the end of the mortgage, you can now repay it with the full funding previously split between your HELOC and mortgage, which would look like this...

So paying off the last $10k from the HELOC takes an additional 6 months after the end of the mortgage. So months of payments saved is 219. The HELOC interest paid (217.99 * 11 + 133 = 2530.89) must be subtracted from the Mortgage interest saved (95267.33 - 2530.89 = 92736.44). During this time, your additional liquid funds available in the HELOC are as low as $10k during the year.

.

Scenario 2 - The Mortgage Method: If you can afford an additional 851.50 every month above and beyond the mortgage payment in Scenario 1, then you can do likewise in Scenario 2, as both are utilizing the HELOC for liquid reserves and thus allowing 100% of discretionary income to also be applied to the mortgage each month. So the mortgage would simply look like this...

Notice how many fewer steps (calculations) are involved to pay off all associated debts in Scenario 2. Notice the additional 1 month of payments saved before all associated debts are paid off in Scenario 2. Notice the additional 490.86 of total interest saved before all associated debts are paid off in Scenario 2. Oh yea, and notice that not once does available liquid funds from the HELOC dip below the full $20k in Scenario 2.

These are the results for the repayment of ALL associated debts incurred, based on the calculators that you specifically hold in such high regard...Even over advanced excel spreadsheets that can be much more exactingly tailored to suit specific uncommon situation like the so-called "HELOC method", and even though these simplistic calculators were never designed or intended to handle such irregularities. When correctly using the calculator that you recommended, so as to not let poor mathematical inputs obfuscate the truth with equally poor mathematical outputs, this "HELOC method" does not show one single advantage over maintaining a $0 balance HELOC and applying the same total monthly discretionary funds simply and directly to the mortgage on a monthly basis.