I'm actually just trying figure out what the deal is here. Right now I can get a 3 year variable rate loan at prime -.8 or 2.05%. I can prepay up to 20% a year anytime I want...300k mortgage, 60k prepayment, 5k per month in prepayment priviledge. The same site is telling me the best HELOC I can get is 4%. I'm sure I could do better. Mine is 3.65%. The very best spread a HELOC can offer me is 5k for 30 days at a 2.05% spread (assuming I get a bonus paycheck on the first of the month and can't apply it to my mortgage until the end of the month). Or about $8 bucks minus whatever extra interst I'm paying (1.6% extra) on my loc balance.
The thing is, you can find mortgages that are just about the same as an LOC minus the ability to use it as a checking account. If you're just trying to pay down a mortgage, you're way better off getting the lower rate with much better prepayment terms than the fixed part of your mortgage scenario. I'm just puzzled because you you're suggesting people are using this to great benefit. Can you give an example?
If I had or expcted to have a large lump sum (more than 20%) coming in, I'd just get an open mortgage and still pay less interest than an loc.
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