Author Topic: Where does a 2nd Mortgatge HELOC fit in payoff plans  (Read 1138 times)

Recovering Spender

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Where does a 2nd Mortgatge HELOC fit in payoff plans
« on: May 04, 2017, 03:32:54 PM »
Long time, first time.

We have a 2nd Mortgage HELOC that was taken out as part of a jumbo mortgage loan package.  It's a variable interest rate, currently at 6.25%, up from 5.99% after the recent Fed increase.  I am already paying about double on it.

We just finished paying off our car and some other debt, leaving us with two smaller credit cards (~5K each, 100.00 monthly payment, both at 0% interest) and a student loan ($5K, $122 monthly, 3.25%). 

My general question - do we treat the HELOC as part of our mortgage and save it for later in the process or do we use our previous snowball to move to the HELOC since it now has the highest interest rate?   Debt snowball is about $1,800/month at the moment.

If it matters, we can likely pay off the HELOC lump sum in March if bonus/RSU grants come in like they have for the last 5 years.

Thanks!

Scortius

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Re: Where does a 2nd Mortgatge HELOC fit in payoff plans
« Reply #1 on: May 04, 2017, 04:36:48 PM »
Given it's already at 6.25% and remains a variable rate, I'd just kill it as quickly as possible after you max out all tax advantaged accounts.  Don't bother paying any of the low interest loans off early.

SwordGuy

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Re: Where does a 2nd Mortgatge HELOC fit in payoff plans
« Reply #2 on: May 04, 2017, 06:00:15 PM »
Those credit cards are at 0% until when?   What will they rocket up to after the 0% grace period ends?  25%?

How many months will it take to take those CCs to zero?
Ditto for the HELOC?

Depending on the answers, you might want to hammer those CCs first, or hit the HELOC for some months, then switch over to the CCs in time to pay them off before the interest kicks in.

Oh, do you have to pay back interest if the CCs aren't at zero by the end of the grace period?   

frugaliknowit

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Re: Where does a 2nd Mortgatge HELOC fit in payoff plans
« Reply #3 on: May 05, 2017, 11:33:32 AM »
Those credit cards are at 0% until when?   What will they rocket up to after the 0% grace period ends?  25%?

How many months will it take to take those CCs to zero?
Ditto for the HELOC?

Depending on the answers, you might want to hammer those CCs first, or hit the HELOC for some months, then switch over to the CCs in time to pay them off before the interest kicks in.

Oh, do you have to pay back interest if the CCs aren't at zero by the end of the grace period?   

+1

tweezers

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Re: Where does a 2nd Mortgatge HELOC fit in payoff plans
« Reply #4 on: May 05, 2017, 03:36:25 PM »
I would pay the minimum on the credit cards and throw the difference at the HELOC.  Just before the interest-free period ends on the credit cards, pay them off with a draw from the HELOC, and then continue focusing on paying that down.

Recovering Spender

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Re: Where does a 2nd Mortgatge HELOC fit in payoff plans
« Reply #5 on: May 05, 2017, 04:09:22 PM »
Those credit cards are at 0% until when?   What will they rocket up to after the 0% grace period ends?  25%?

How many months will it take to take those CCs to zero?
Ditto for the HELOC?

Depending on the answers, you might want to hammer those CCs first, or hit the HELOC for some months, then switch over to the CCs in time to pay them off before the interest kicks in.

Oh, do you have to pay back interest if the CCs aren't at zero by the end of the grace period?   

Credit cards are interest free through at least bonus time next year, when this will all likely become academic. 

One is a Best Buy promotional rate through April 2018.  Interest would be 18.74% on the full balance with deferred interest of roughly $1,000.  We will never get to that point, though since I'll adjust to pay the balance off to avoid that deferred interest.

The second is a US Bank credit card, that as far as I can tell, has never charged us interest.  The statement lists the interest rate for purchases at 0.00% and it is not a promotional rate.  A bit of a Pandora's box since it might be a mistake, so maybe I'll just wait for the other shoe to drop.  For the moment, I am treating it for what it is - a 0.00% rate.

Neither card will further purchases.  We have never drawn on the HELOC except for the 2nd mortgage and don't plan to.  All future house renovations, etc will be cash flow transactions.

Would take approximately 3 months each to pay off the credits cards, and about 26 months to pay off the HELOC, assuming the status quo on the snowball amount.

It's also possible that the HELOC could be killed in March with annual bonus and/or RSU proceeds.