HELOC

[Bigjones]

Quick Question....

I have no first mortgage but have a 74k Heloc

Going to make a big push to pay it off in the next 3\4 years
Current bank 5.25%
Other bank in my town 2.99%

Is it worth it to push this all over to a new bank and pay those fees etc or since im hoping to pay it off in 3\4 years just sit and and pay the little extra in interest.

A biweekly 1k payment i believe would almost pay it off in 3yrs flat.

[Lews Therin]

You can go to your Bank make have them do the Math for you.

Interest on 5.25% compared to 2.99%+penalty fees. Whichever is lower, go with that one.

Also, they might be willing to renegotiate if you tell them you will be leaving.

[sokoloff]

Napkin math is you're looking to compare a 2% spread on a 3 year payoff of $75K.

Ignoring compounding (this is napkin math), your balance due will look like a triangle 3 years wide and $75K high. On average, you will owe $37.5K over that time period, so what's 2%/yr on $37.5K times 3 years?

It's 1.5% of $37.5K or $5625. That's the amount of money you're looking to save, so the fees to move to the new HELOC better be lower than that, or you can just stay put. Now, fees on HELOCs are usually extremely low, so you're likely to save money by moving (or negotiating with your current bank).

[mistershankly]

I have a HELOC with a similar balance.  The bank it's through has "promotional rates" which are partially amortized withdrawals (meaning the minimum payment is not interest-only and some of the minimum payment goes to principal) at 2.99% for 1 year, 3.79% for 3 years, or 4.25% for 5 years.  I can withdraw a specific amount under that "promotional rate" and associated term.  My balance is currently entirely under an annual 2.99% rate (used to be 1.99% some years back but gradually increased... 2.25%, 2.49%, etc), and I simply withdraw another set amount out annually to pay down the expiring promotional balance.  This is something you may want to look into with your current lender.

Also, I'd check with the 2.99% bank and see if that is indeed a "promotional rate" that resets after a period of time to a rate that is tied to the prime rate (mine is prime + .65).  I've never seen a bank offer such a low rate on a long term HELOC (assuming it's a 10-year deal).

FWIW, I've been a proponent of paying down mortgage and HELOC debt for years, but the low rates offered by my bank in the scenario I described has changed my perspective on just how quickly to pay the debt off while using the savings to add to our Vanguard funds.

[katsiki]

Do you have a breakdown of these fees?  Many banks and credit unions have no fee HELOCs.