The prudent thing at first appeared to be to use a 30 year fixed to finance a home. Now we are seeing how risk taking is going to be rewarded. For many borrower they are going to substancially benefit if by the time of reset interest rates ahve fallen back to their previous teaser rates. The spread between the reasonable fixed rates vs. the unprecedently low teaser rate means that those who took the risk save a ton of dough over the last 3 to 5 years. Can anyone argue against this?
So this is a really dumb question. And it probably doesn't deserve entertaining.But bear with me.
Suppose in the future that I still can get a Heloc or some sort at say 4%. (Yes, unlikely, I know, but let's just say hypothetically rates keep getting lower, and suppose also I have a LTV ratio about a 69% ltv ratio)
I'm currently on a 30year fixed jumbo at 5.5% and I regularly make additional principle payments of $25k/year. The problem is that the $25k/year additional payment is made spread out across each month. It seems like I would be better of paying the entire $25k in extra principle payment up front at the beginning of the year, since it seems like the outstanding lessened principle would be compounded months there after.
Problem is, I can't cash flow an one time $25k payment at the beginning of each year, since I depend somewhat on a reoccurring paycheck. So though I can make this $25k extra principle payment over the course of the year, a lump sum payment up front isn't possible.
I'm just wondering if it would actually make sense to borrow against a Heloc, say $22k each year, (if the rates are low enough), and use that to pay off a chunk of principle on my primary early in the year, and then as my paycheck rolls in, pay off the $22k outstanding balance on my heloc within that year, assuming my heloc rate i could get would actually be lower than my fixed.
Again, this is probably a stupid, nonsensical idea, but pardon the ignorance, I'm sort of new any creative financing that one can think of.
I'm asking this , in lieu of it seems like short term financing vehicles are going to get cheaper and cheaper. It would probably be foolish to refinance out of a fixed rate mortgage for me (my rate is already pretty decent). But I'm just wondering if I can take advantage of any short term, cheaper money to pay for the longer term debt. I'm no finance guru, that's why I'm asking.
