Thanks K-ice for the information.

I think I understand better now. I looked quickly at HELOC rates in my area and can't find anything close to what my interest rate on mortgage is, 2.75. Most HELOC rates are 4.5 and up. It sounds like the HELOC rate has to be lower than mortgage for this to work.

Of course the lower the HELOC interest rate the better but actually I tested it with $100,000 borrowed at 2.75% for 30y and a $10,000 HELOC at 4.5% paid off at $1,000/month and

**it still works**.

How? Because the $10,000 immediately changes the mortgage principal to $90,000. And you pay the HELOC off in a very short period of time, not amortized over 30y.

I tested 2 scenarios plugging numbers into this calculator:

https://www.vertex42.com/Calculators/home-mortgage-calculator.htmlOption 1,

Regular mortgage $100,000 borrowed at 2.75% for 30y.

The interest paid on the first year in the mortgage is $2723.

Option 2,

If you can borrow $10,000 from your HELOC and immediately pay it towards your mortgage

The interest paid on the first year in the mortgage is $2468.

You also save a total of 11,430.48 and 4.5years off the life of your mortgage.

Of course you still have a $10,000 HELOC to pay down at 4.5%. So your quick calculation may say this is $450 in interest. However, remember, your monthly surplus, assuming $1000 goes to pay this off so the total interest is only $211. Add that to the mortgage interest and $2679 is still < $2723.

It is still surprisingly better even with the different interest rates. Is it worth the hassle when the difference is now less than $100 per year?

When you repeat this process every year, your 30y loan will be paid off in only 7 years-1 month. With a total interest savings of $37,000 compared to no early payments.

Option 3 is also quite good and what many people on this thread are doing. That is stash the money and pay $10,000 every year at the end of the year. You will pay off your loan in 8y with a total savings of $35,000.

So the Numbers are better with the HELOC method even with the mortgage at 2.75% and the HELOC at 4.5%. It is now a question of psychology. I am pretty disciplined and had a regular checking account, savings account and my HELOC just sitting there unused for a few years. But my savings would build up and I hated it not working for me. I also feel like my HELOC is “hair on fire” debt and I feel I pay it off faster than I would save $10,000.

As they said in the podcast. They just started with $5000 and paid that off in a few months. Their income is admittedly high. If it takes you 2 stressful years to pay down the $5000 stay away from the HELOC. However, if you can easily pay back the $5000, rinse and repeat a few times and you will really start to see your HELOC working for you.