Mortgage Strategy

[Raybyrnes]

For the Mortgage guys on the board I have a question?

For those who own homes and have a mortgages at the moment. Would it not make sense to begin looking at taking an equity line for a mangementable amount, say 50 to 100 K and using this to pay down the first.(Assuming 1st is at a higher rate say 6+) It would seem that with the fed dropping rates and with equity lines being tied to the prime rate that there would be a good opportunity at reducing financing costs.

This would seems easier and less expensive than refinancing the entire nut in additonal to the fact that longer term interest rates are not responding the same way as short term rates.

I realize that there is an added layer of risk that rates could spike up and that is the reason for taking out a management amount under the Equity line. I welcome opinion on this matter.

http://www.usecu.org/home/loa.loa_hel.loa_hel_heloc;jsessionid=A33088824CF5D9EAFAF623991514D51B.falcon1a

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[Coronita]

Raybarnes,

I hear an echo. Didn't I bring this up before? 🙂 J/K. Actually, I thought about this, but haven't looked into it yet . I think it *might* work if you already are making extra payments off of the mortgage, but just can't do it off a lump sum. For example, I probably pay and extra 3000000 yen /year off principle. But my paycheck comes in monthly, so Ican't for example pay the entire 3000000 yen say at the beginning if the year. BUT, if I borrow 2800000 yen from a low interest heloc and make 1 lump sum at the beginning of the year, and pay off my heloc with funds that I would have used to normally make an extra principle payment, it *might* turn out that my reduced principle of my mortage carried across the remainder of the year will save me more money than the extra interest that I am paying off of my Heloc balance, which I end up paying off each year. There's probably some magic number principle payment that makes this worthwhile the hassle. But I haven't looked into details of implementation.

The other thing might be some have mentioned getting heloc's these days are very difficult. I would say this would eliminate people that are upside down or even close to upside down. In my particular case, I already paid off about 35% of the principle, so this probably won't be a big issue for me, since I don't think my home price has fallen by 35% from the price that I purchased (yet).

[img_assist|nid=5962|title=selfportrait|desc=|link=node|align=left|width=100|height=80]

—– Sour grapes for everyone!

[Raybyrnes]

My thought process here are for those who are in a good equity position.
It would seem taht if I could pay off 100K on a a fixed rate product at 6.125 with Equity line at 4.125 I should be able to recognize an interest saving of 2% on that 100K with a minimal amount of risk. It would appear to be a saving of about 2K in year 1 alone using very rough math. I am not factoring loan amortization, Timae Value Money, Opportunity Cost of capital etc.

Just seems like there is a good arbitrage situation here to reduce financing costs.

Like the Sunday Coupon Section. When I see a coupon for 99 cent eggs I cut it out. Seems like there are some coupons available for those willing to cut them out. Only the savings are a lot greater.

[Raybyrnes]

My thought process here are for those who are in a good equity position.
It would seem taht if I could pay off 100K on a a fixed rate product at 6.125 with Equity line at 4.125 I should be able to recognize an interest saving of 2% on that 100K with a minimal amount of risk. It would appear to be a saving of about 2K in year 1 alone using very rough math. I am not factoring loan amortization, Timae Value Money, Opportunity Cost of capital etc.

Just seems like there is a good arbitrage situation here to reduce financing costs.

Like the Sunday Coupon Section. When I see a coupon for 99 cent eggs I cut it out. Seems like there are some coupons available for those willing to cut them out. Only the savings are a lot greater.

[Raybyrnes]

My thought process here are for those who are in a good equity position.
It would seem taht if I could pay off 100K on a a fixed rate product at 6.125 with Equity line at 4.125 I should be able to recognize an interest saving of 2% on that 100K with a minimal amount of risk. It would appear to be a saving of about 2K in year 1 alone using very rough math. I am not factoring loan amortization, Timae Value Money, Opportunity Cost of capital etc.

Just seems like there is a good arbitrage situation here to reduce financing costs.

Like the Sunday Coupon Section. When I see a coupon for 99 cent eggs I cut it out. Seems like there are some coupons available for those willing to cut them out. Only the savings are a lot greater.

[Raybyrnes]

My thought process here are for those who are in a good equity position.
It would seem taht if I could pay off 100K on a a fixed rate product at 6.125 with Equity line at 4.125 I should be able to recognize an interest saving of 2% on that 100K with a minimal amount of risk. It would appear to be a saving of about 2K in year 1 alone using very rough math. I am not factoring loan amortization, Timae Value Money, Opportunity Cost of capital etc.

Just seems like there is a good arbitrage situation here to reduce financing costs.

Like the Sunday Coupon Section. When I see a coupon for 99 cent eggs I cut it out. Seems like there are some coupons available for those willing to cut them out. Only the savings are a lot greater.

[Raybyrnes]

My thought process here are for those who are in a good equity position.
It would seem taht if I could pay off 100K on a a fixed rate product at 6.125 with Equity line at 4.125 I should be able to recognize an interest saving of 2% on that 100K with a minimal amount of risk. It would appear to be a saving of about 2K in year 1 alone using very rough math. I am not factoring loan amortization, Timae Value Money, Opportunity Cost of capital etc.

Just seems like there is a good arbitrage situation here to reduce financing costs.

Like the Sunday Coupon Section. When I see a coupon for 99 cent eggs I cut it out. Seems like there are some coupons available for those willing to cut them out. Only the savings are a lot greater.

[Coronita]

Raybarnes,

I hear an echo. Didn't I bring this up before? 🙂 J/K. Actually, I thought about this, but haven't looked into it yet . I think it *might* work if you already are making extra payments off of the mortgage, but just can't do it off a lump sum. For example, I probably pay and extra 3000000 yen /year off principle. But my paycheck comes in monthly, so Ican't for example pay the entire 3000000 yen say at the beginning if the year. BUT, if I borrow 2800000 yen from a low interest heloc and make 1 lump sum at the beginning of the year, and pay off my heloc with funds that I would have used to normally make an extra principle payment, it *might* turn out that my reduced principle of my mortage carried across the remainder of the year will save me more money than the extra interest that I am paying off of my Heloc balance, which I end up paying off each year. There's probably some magic number principle payment that makes this worthwhile the hassle. But I haven't looked into details of implementation.

The other thing might be some have mentioned getting heloc's these days are very difficult. I would say this would eliminate people that are upside down or even close to upside down. In my particular case, I already paid off about 35% of the principle, so this probably won't be a big issue for me, since I don't think my home price has fallen by 35% from the price that I purchased (yet).

[img_assist|nid=5962|title=selfportrait|desc=|link=node|align=left|width=100|height=80]

—– Sour grapes for everyone!

[Coronita]

Raybarnes,

I hear an echo. Didn't I bring this up before? 🙂 J/K. Actually, I thought about this, but haven't looked into it yet . I think it *might* work if you already are making extra payments off of the mortgage, but just can't do it off a lump sum. For example, I probably pay and extra 3000000 yen /year off principle. But my paycheck comes in monthly, so Ican't for example pay the entire 3000000 yen say at the beginning if the year. BUT, if I borrow 2800000 yen from a low interest heloc and make 1 lump sum at the beginning of the year, and pay off my heloc with funds that I would have used to normally make an extra principle payment, it *might* turn out that my reduced principle of my mortage carried across the remainder of the year will save me more money than the extra interest that I am paying off of my Heloc balance, which I end up paying off each year. There's probably some magic number principle payment that makes this worthwhile the hassle. But I haven't looked into details of implementation.

The other thing might be some have mentioned getting heloc's these days are very difficult. I would say this would eliminate people that are upside down or even close to upside down. In my particular case, I already paid off about 35% of the principle, so this probably won't be a big issue for me, since I don't think my home price has fallen by 35% from the price that I purchased (yet).

[img_assist|nid=5962|title=selfportrait|desc=|link=node|align=left|width=100|height=80]

—– Sour grapes for everyone!

[Coronita]

Raybarnes,

I hear an echo. Didn't I bring this up before? 🙂 J/K. Actually, I thought about this, but haven't looked into it yet . I think it *might* work if you already are making extra payments off of the mortgage, but just can't do it off a lump sum. For example, I probably pay and extra 3000000 yen /year off principle. But my paycheck comes in monthly, so Ican't for example pay the entire 3000000 yen say at the beginning if the year. BUT, if I borrow 2800000 yen from a low interest heloc and make 1 lump sum at the beginning of the year, and pay off my heloc with funds that I would have used to normally make an extra principle payment, it *might* turn out that my reduced principle of my mortage carried across the remainder of the year will save me more money than the extra interest that I am paying off of my Heloc balance, which I end up paying off each year. There's probably some magic number principle payment that makes this worthwhile the hassle. But I haven't looked into details of implementation.

The other thing might be some have mentioned getting heloc's these days are very difficult. I would say this would eliminate people that are upside down or even close to upside down. In my particular case, I already paid off about 35% of the principle, so this probably won't be a big issue for me, since I don't think my home price has fallen by 35% from the price that I purchased (yet).

[img_assist|nid=5962|title=selfportrait|desc=|link=node|align=left|width=100|height=80]

—– Sour grapes for everyone!

[Coronita]

Raybarnes,

I hear an echo. Didn't I bring this up before? 🙂 J/K. Actually, I thought about this, but haven't looked into it yet . I think it *might* work if you already are making extra payments off of the mortgage, but just can't do it off a lump sum. For example, I probably pay and extra 3000000 yen /year off principle. But my paycheck comes in monthly, so Ican't for example pay the entire 3000000 yen say at the beginning if the year. BUT, if I borrow 2800000 yen from a low interest heloc and make 1 lump sum at the beginning of the year, and pay off my heloc with funds that I would have used to normally make an extra principle payment, it *might* turn out that my reduced principle of my mortage carried across the remainder of the year will save me more money than the extra interest that I am paying off of my Heloc balance, which I end up paying off each year. There's probably some magic number principle payment that makes this worthwhile the hassle. But I haven't looked into details of implementation.

The other thing might be some have mentioned getting heloc's these days are very difficult. I would say this would eliminate people that are upside down or even close to upside down. In my particular case, I already paid off about 35% of the principle, so this probably won't be a big issue for me, since I don't think my home price has fallen by 35% from the price that I purchased (yet).

[img_assist|nid=5962|title=selfportrait|desc=|link=node|align=left|width=100|height=80]

—– Sour grapes for everyone!

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