Ways to reduce interest on Home Equity LOC

If that is your HELOC, then I am going to assume that you have a "first" mortgage? If so, how much is that mortgage for?

You will likely get better suggestions here but I'd like to open it up by asking if you could you just refinance and combine the mortgages at a fixed rate? 9% sounds high and I just couldn't get my little brain around how to work 0% credit cards to be able to pay off 120K without a really high salary but there are guys here that probably can, as I am a newbie.

Just out of curiosity, how did it get so high? Home improvements?

I think given your circumstances, take the credit score hit and apply for 0% BT. Lots of others have done so in similiar position.

Just make sure you apply the principles of APP-O-RAMA with the main idea being that if you collect all these BTs and apply for them simultaneously so the likelihood of getting more of them approve will increase.

After an APP-O-RAMA and with high utilization due to BT, you're credit score will take a nose dive. So don't expect to get great rates on future loans, credit card offers, etc. Its usually not as bad as you think its going to be. Just remember to pay off your debts on time and manage your debt well. Eventually the 0% BT game will run out on you if you don't plan to pay it down!

I have offer from MBNA. It is Debt-Free Plan. It offers upto $50000 at non-variable rate as low as 7.49% APR for upto 72 months.

SoftwareDeveloper said: I have offer from MBNA. It is Debt-Free Plan. It offers upto $50000 at non-variable rate as low as 7.49% APR for upto 72 months.Other than 7.49%, what APRs might you get instead on the $50k ?

Alcibiades said: SoftwareDeveloper said: I have offer from MBNA. It is Debt-Free Plan. It offers upto $50000 at non-variable rate as low as 7.49% APR for upto 72 months.Other than 7.49%, what APRs might you get instead on the $50k ?

I can keep paying 9% rate on my HELOC and get the tax break on the interest. I don't know which option is better.

Wow... just wow... no wonder the FED needs to raise the rates...

Get a second mortgage at a fixed rate.
If your credit took a hit, wait awhile and do the refinancing.
Take the time to do it once an right.

Else, I second the BT and app-o-rama.

SoftwareDeveloper said: I was planning to improve my credit score and refinance after few months. What do you say on this? Would my credit score reduce a lot by taking mortgage and HELOC?You didn't mention this before. I think the 30 year fixed is still at a reasonable rate right now if you can afford the payment. Get in on that if you can.

Check your real credit score at myfico.com

Alcibiades said: SoftwareDeveloper said: I was planning to improve my credit score and refinance after few months.Rates may be higher after a few months.

Especially for "C" and "D" credit risks.

It amazes me how many people did not see this coming. The moral of the story is if you have an adjustable rate mortgage or HELOC do anything within your power to lock your rate now. Our bank scoffed at us when we insisted on refinancing our HELOC to a fixed rate last fall (we were not able to do it sooner, otherwise we would have done it last summer)--who's laughing now?

I might be wrong, but I didn't get the impression that the OP was necessarily in financial hot water. I assumed he was looking for a way to pay less interest.

If that's the case then getting several 0% BT will reduce his interest burden. The min payments will be more than the 2nd or HELOC, however more of his payments will be applied to the "principle."

If there's deviation from that strategy other than to take a smaller BT and pay off just a portion of the 2nd, then I agree with everyone else. You are just shooting yourself in the foot.

You need to be able to afford to close out the BTs within a reasonable amount of time for this to be a prudent financial strategy to pay "less" interest. Anything else is just delaying the inevitable and maybe making it worst later with a temporary reprieve while you play the credit game.

SoftwareDeveloper said: I was planning to improve my credit score and refinance after few months. What do you say on this? Would my credit score reduce a lot by taking mortgage and HELOC?

Mortgage no. HELOC, maybe depends upon how it is reported to Credit Bureaus. If reported as "revolving" (Same as a credit cards) and you are near 100% utilization (greater than 90% anyway) that hurts your FICO. Not only for one credit line being so high, but your overall utilzation will be high as well unless you have some really big credit card lines.

How do you plan to improve your credit score? Do you know what your score is?

FYI, if you do an app-o-rama that WILL hurt your FICO.

HELOC is a floating interest rate loan. People get into HELOC mainly for the following three reasons:

1) Interest rate is high and will go much lower. You don't want to lock in your interest at a high level.
==== Current situation is the opposite. Interest rate will go higher, not lower.
2) Don't really need it. Just for financial flexibility.
3) Need short term financing (need cash now!). Can pay off the principle in a few years.

I believe OP is reason 3). He CAN handle the payment. Just want to save money on interest.


I am in a similar situation with OP's but on a much smaller scale.

I have 45K first mortgage on my 17.5K house. 75K balance on my HELOC from Nexity Bank (1% for three month, then Prime - .25%). 35K in Amboy and HSBC eSavings (currently earn 4.75% interest rate).

I just applied for six new credit cards yeaterday. Will do another three today. If I can get 50K CL, plus $40K 0% BT promotion from my existing cards, I can drop my HELOC balance to zero, and put extra 50K in eSavings account.

My estimation is that the interest I earn from esavings accounts will offset the interest payment on my first mortgage.

Maybe my bonus next year will be 40K. Then I can pay off all my credit cards.

To answer OP's question:" Ways to reduce interest on Home Equity LOC".


Here is my suggestion:

1) Go with "mbna - dept-free plan with 7.49% APR utpo $50000". Your first mortgage's interest payment will max out your itemized tax deductable. You will not get any tax benefit for your second mortgage interest payment. So anything lower than 9% is better.
2) Apply for 10 or more credit cards in one day for 0% BT for 12 mths. If your first mortgage is 525K, you have a good chance to get more than 50K BT at 0% for 12 mths. That's $4,500 saving. Some credit cards even off $100 signing bonus.
3) "3.9% for first 6 months upto $9500 in my existing discover card account."

And with Universal Default, one glitch and the cc interest goes sky high.

Very interesting situation.

Because OP will be in no better shape if the HELOC rate goes up, I think he needs BTs.
Having the HELOC maxed out is not a good thing for his credit.

Use the HELOC to pay the CC.
On a $50k BT @ 0% for 1 year and using the HELOC to pay the CC @ 2%/month, you will save $3,992.41 in interest payments.

xjhuan said: He can always pay those credit cards by HELOC, even after one year. His balance on HELOC for the first year will be much lower than it would be. Therefore he will save money on interest payment.
I see that...but I was thinking OP's looking for a permanent rate cut.

I think he should also try to get Home Equity Loan cuz the rate is fixed still pretty low ~6.5% for 10 years term. Some lenders might allow this cuz he get this loan to pay off a portion of his loan.

FICO = 715? A couple more inquiries will put it under 700 and that’s the danger zone.

Sell house, buy/rent something you can afford.

And I don't want to pay my bills. I want them to pay me.

Is this a joke?

It sounds like you were using a HELOC to pay your mortgage that you couldn't afford in the first place?

You are trying to reduce your interest cost in a rising interest rate environment.

You likely have no equity in your home in a flat to falling or possibly bursting housing market.

You say you can afford $4k a month at most, yet your own calculations come out to needing $5878, and still don't see a problem.

Yet, you think you had no choice but to buy a $660k house in CA instead of renting?

What are you going to do if the house drops $100k in value or even stays flat, and you need to sell? You do know that you can't just pay interest-only forever, right?

Typical Fatwallet thread. FW member SoftwareDeveloper poses a question asking for help and gets lots of criticism with little of it being constructive. People are making lots of assumptions, some of them wrong based on the info the OP has given us. For all we know, someone was holding a Chipotle Burrito to the OP's head when he agreed to buy this house, thus rendering this a perfectly reasonable transaction.

mgdeals said:
You say you can afford $4k a month at most, yet your own calculations come out to needing $5878, and still don't see a problem.


Best post.