Link to a forum : Question Pay off Home Equity Line of Credit?
First comment from this forum :
"My wife and I have a home equity line of credit with a $23k balance. Rate is variable at 1.75 over prime and the monthly payment goes to *interest only*. We have the opporunity to pay most of it off (17k) with $ from a money market account (annual return of 1.5%). Investing in the stock market is not an option for us right now, and it is important for us to remain liquid just in case one of us loses our jobs in the next few years (an unfortunate reality in our neck of the woods).
My theory is that if we put the 17k towards the line of credit, we'll save ourselves about $80/month in interest payments, or about $960/year, which is more than we would see in return from the money market (and also more than the tax benefit if we were to leave the balance on the LOC). The way I see it is that if we hit financial hardship, we can always borrow from the line of credit just as easily as from the money market.
And lastly, we still have our first mortgage of 124k with 29.5 years left to pay, so we still have plenty of interest to write off in order for us to itemize!
Can anyone advise on the pros and cons of the above? Am I missing something?"
My theory is that if we put the 17k towards the line of credit, we'll save ourselves about $80/month in interest payments, or about $960/year, which is more than we would see in return from the money market (and also more than the tax benefit if we were to leave the balance on the LOC). The way I see it is that if we hit financial hardship, we can always borrow from the line of credit just as easily as from the money market.
And lastly, we still have our first mortgage of 124k with 29.5 years left to pay, so we still have plenty of interest to write off in order for us to itemize!
Can anyone advise on the pros and cons of the above? Am I missing something?"
see this forum at : http://forums.kiplinger.com/showthread.php?t=1193
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