Author Topic: Transferring HELOC with 8.25% rate to 0% credit cards?  (Read 1716 times)

TryingToBeAGoodDad

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Transferring HELOC with 8.25% rate to 0% credit cards?
« on: January 15, 2025, 05:32:05 PM »
If there is a section is this community forum for dunces and dumbasses, please let me know and I will head over there. 😬

I took out a HELOC at 2.99% a while back, used a very large amount ($300k) to remodel a house. The rate went up to 8.25% a year ago and I've been paying out big time. I am a novice money person and just got caught flatfooted.

I have great credit and $4m in real estate (all at less than 3% rate).

Can I try to take out a few 0% interest rate credit cards to stop the bleeding? Any other ideas?

Thanks in advance for your ridicule and help.

sonofsven

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Re: Transferring HELOC with 8.25% rate to 0% credit cards?
« Reply #1 on: January 15, 2025, 06:17:55 PM »
I'm not sure about doing a balance transfer from a HELOC to a cc. Some of them provide you with checks that you could conceivably use to pay down the HELOC balance, I think. But I'm not 100% sure.
But you will be hit with a 3-5% balance transfer fee. And your credit limit would likely max out at $25k or so per card.
So it would make a dent, but a small dent.
Any thoughts on selling the house?
Another option would be a cash out re-fi of the house where you roll the HELOC into the new mortgage amount, but $300k is a pretty heavy lift. Do you have a lot of equity and a good salary? "Owning" 4 mil of real estate might not help, ironically.
And most of the 0% cc offers are 12 months, so what would you do then?
Maybe sell the house?

TryingToBeAGoodDad

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Re: Transferring HELOC with 8.25% rate to 0% credit cards?
« Reply #2 on: January 15, 2025, 08:36:03 PM »
Selling the house is not going happen, but I see where your head is at. We do have $1m of equity in the house so perhaps I can take out another HELOC at a lower rate and pay off the higher rate HELOC. I am going to call the bank I have the current HELOC with for some insight.

Thanks for your reply!

Much Fishing to Do

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Re: Transferring HELOC with 8.25% rate to 0% credit cards?
« Reply #3 on: January 16, 2025, 04:19:06 AM »
This sounds like making the same mistake all over again, trying to get an initial great rate without looking ahead to a reset.  If the answer is you'll plan to pay off most of the debt with what I assume is substantial cashflow before the 0% period ends, then just focus on paying it off.  In the end 8.25% is just not that horrible in today's rate world, but what a CC might reset to could be insane.


TryingToBeAGoodDad

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Re: Transferring HELOC with 8.25% rate to 0% credit cards?
« Reply #4 on: January 16, 2025, 09:46:45 AM »
@Much Fishing to Do  - Thank you! Great feedback.

dandarc

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Re: Transferring HELOC with 8.25% rate to 0% credit cards?
« Reply #5 on: January 16, 2025, 11:41:30 AM »
Check any cards you have that you don't use (mixing purchase and balance transfers = you're gonna have a bad time) for balance transfer offers. On established cards, not uncommon for them to let you do a direct-deposit cash advance with the same promotional offer as on balance transfers. Because the banks sort of understand that money is fungible. Limits to what you can do vary by bank.

Chase: $15K per 30 days
Citi: All the way up to credit limit (and they calculate fee for you so you cannot screw that part up).
Bank of America: same as Citi

All that being said, there's no guarantee that same offers will be available (or any offers) to you when the 12-24 months on the promo rate expires, so keep that in mind with how you decide to repay. I'm in the process of winding down doing this as just a general way to borrow money at low cost - yes it did work out fairly well financially for us and equivalent to paying 3-5% interest rate, but it is stressful as more than once I've had to open a new card to roll things forward when I had offers on existing cards one month and they just vanished the next. Obviously applying for a new card is also not guaranteed, and even if you do get it, takes longer to do a balance transfer than on an existing card typically.

So anyway, if you've got cash-flow or savings to cover where you can pay off the promos on-time if it comes to that, then I'd say try it. But it is not without its perils - if you do wind up not being able to pay the balances off on time, then your non-promo-rate goes up to like 30% with this approach vs. what is highly likely to stay a lower rate with your existing HELOC. I'd probably see if I could get another promo-rate HELOC before doing this CC balance transfer thing to the tune of $300K.

Morning Glory

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Re: Transferring HELOC with 8.25% rate to 0% credit cards?
« Reply #6 on: January 16, 2025, 12:05:56 PM »
You might want to do a full case study. You'll get very different advice if that 300k represents 1 year of cash flow/ other income vs ten years, for example.

Catbert

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Re: Transferring HELOC with 8.25% rate to 0% credit cards?
« Reply #7 on: January 17, 2025, 11:55:26 AM »
Never put more on a 0% credit card than you can absolutely pay-off within the 0% period.  If 8.25% is bad, 29% when your 0% cc period is over is a disaster.  You can't count on getting additional free interest when the existing ones expire.

Be aware that a maxed out credit card will affect your credit score.  I got a 0% 18 month offer from Fidelity right when I needed a new roof.  My overall credit utilization was 15%, but utilization on that one card was ~80%.  My VantageScore dropped 40 points and FICO 20 points because of one almost maxed out card. 

elysianfields

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Re: Transferring HELOC with 8.25% rate to 0% credit cards?
« Reply #8 on: January 18, 2025, 01:30:15 AM »
Never put more on a 0% credit card than you can absolutely pay-off within the 0% period.  If 8.25% is bad, 29% when your 0% cc period is over is a disaster.  You can't count on getting additional free interest when the existing ones expire.

Be aware][url][/url] that a maxed out credit card will affect your credit score.  I got a 0% 18 month offer from Fidelity right when I needed a new roof.  My overall credit utilization was 15%, but utilization on that one card was ~80%.  My VantageScore dropped 40 points and FICO 20 points because of one almost maxed out card. 

I’ve had a similar experience with credit scores decreasing and while that hasn’t made life difficult, I haven’t been able to hack credit card offers the way I would have liked.

You can always continue to keep transferring balances to 0% cards every time you pay them off, assuming you’re using your HELOC to do this.

Another source of cheaper credit is margin loans from Interactive Brokers if you have a large stash of stocks or ETFs, but you need to feel comfortable with that risk. I also wouldn’t use more than 10-20% leverage, because a large fall in stock prices can lead to your stocks being sold to cover your margin loan.  So tread lightly if you use this for a lower blended rate than your HELOC.

lifeisshort123

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Re: Transferring HELOC with 8.25% rate to 0% credit cards?
« Reply #9 on: January 18, 2025, 03:38:01 PM »
Depends on the goal.... Suze Orman would point out that HELOCs are secured debt and Credit Card debt is unsecured...

My advice would be to keep it as is and not mess with the CC...