[Advice Needed] Invest in brokerage or pay off HELOC

[familyFIguy]

Hey all,

Tl;DR: Should I pay off my $107k HELOC floating int. @ 9.24% with my index-invested taxable brokerage account?

Details

35m with family of 5. Single income. 1.2MM net worth (700k RE, 500k cash+equities). 74% savings rate.

Last year my partner and I purchased two investment properties with 100k from brokerage and ~130k from a HELOC (originaly bearing quite low interest). While the values of the properties have dropped ~6% since we purchased them, they cash flow 2.2k/month before HELOC payments. I've been using the excess cash flow to pay down the heloc since we got the properties so we haven't been stashing cash.

Now that rates are getting higher, it might make sense to pull money from brokerage (or stop investing aggressively in our taxable brokerage account) in order to pay down the HELOC faster.

My simple math is that I plan for 8-9% estimated market growth and the HELOC bears int. over that so I should throw all my money at the HELOC until either it is at $0 or the rate drops below 8-9%. There are also taxable gains in the brokerage account that would have to be considered.



Are there other parts of this equation that I'm not thinking about? Are there benefits of keeping the cash invested vs. paying down the HELOC?



Thanks!

[RWD]

9.24% is quite the high rate. I would definitely be prioritizing knocking that out (while keeping in mind tax consequences of liquidating any taxable brokerage account funds).

[JAYSLOL]

9.24% is a pretty fantastic rate have guaranteed, but how long would it take you to pay that off without withdrawing anything, just all new money to be invested going in?  If you can knock it out in a year or less then don’t withdraw from your taxable brokerage, if it’s going to take you years then I’d just take the tax hit and get rid of the HELOC

[familyFIguy]

9.24% if floating so not locked :/ Wiithout withdrawing anything it would take about 2 years aggressively to pay the thing off without any withdraws from taxable brokerage accounts.

[Louise]

That rate is kind of high. That would make me want to pay it off, but I guess it depends on your tax situation.

We used our HELOC for some home improvements a few years ago, rather than drain our taxable account to pay for them. We don't normally have any debt. One thing I found was that I treated that HELOC like a hair on fire emergency. Every purchase was scrutinized and I was on top of meal planning. I don't approach extra saving that way that's for sure.

I think we were actually better off paying off our debt over time because we were focused on paying that off asap, rather than going out to eat, traveling, etc. At the same time our taxable investments did well. The interest rates were much lower then, so the math made more sense.

[ChpBstrd]

If offered a 9.24% return risk-free, take it every time.