Hello,
Can I please get some advice on whether a HELOC makes sense for me in this situation?
My home is worth ~ $295,000
I have a balance of about $136,000 on a mortgage at 3.75%, about 16 years left on a 20 year term. PITI is about $1250/mo
I just paid $8000 for a new roof. I put it on a credit card (0% interest until Mar 2019). I have the cash to pay it but it's a bit tight so gave myself a bit of a cushion.
Now I need to get about $18,000 of work done on my foundation.
The company doing the work offers 4.99% fixed rate financing for 84 months. $29 origination costs. Would need to put a 20% deposit which I would put on the same credit card and probably be able to pay it off before my 0% rate runs out. But, I will definitely be in a bit of a cash crunch for a while.
Or I could get a HELOC. Looks like my high street bank will give me one with no closing costs and a rate at around 6.09% fixed for 10 years. Or if I took at least $25,000 I could get a variable rate that starts at 3.74% for 12 months then rises to 5.49% *at current rates*. Not sure I want to risk a variable rate given rates are so low right now, they can only go up.
But, I figure I could claim all $25000 (or whatever amount) as being used for substantial home improvement this year and deduct the interest. I am nowhere near the deduction limits for property-related interest, and I'm in the 25% bracket at least (or did all that just change?). So does that mean my 6.09% rate is effectively 25% lower (~4.5% effective), making it more competitive with the 4.99% financing?
Thanks for any guidance.
JWE
