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Home Equity Loan Promo Rate
Old 08-11-2018, 01:41 PM   #1
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Home Equity Loan Promo Rate

My bank mailed me a promo rate deal on my home equity loan today. The normal variable rate is 4.7%, and the promo rate is 0.490% through my January statement cycle.


Would you ignore, or take the money and invest for the difference?
I have been investing in floating rate bonds (FLRN and FLOT) that pay about 2.6% - and they seem pretty safe - not affected by by higher rates. Another option for me in NJ in VNJTX - the NJ muni bond fund that pays about 3.6% and tax free.


Thoughts? I can take up to 200k.
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Old 08-11-2018, 01:50 PM   #2
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Do they charge you closing costs after the fact if you close the loan before a certain period of time has expired?
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Old 08-11-2018, 01:53 PM   #3
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No closing costs and no fees at all. Just the promo rate, and if I keep the money out past January, the rate goes back to 4.7% (or higher if rates rise in the meantime).
I should add this is an existing Home Equity Line of Credit.
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Old 08-11-2018, 01:54 PM   #4
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Go for it!
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Old 08-11-2018, 02:55 PM   #5
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I would do this ONLY if invested in a guaranteed return, no principal risk instrument. I would not use a floating rate bond fund or a muni fund, unless I was prepared to pay back the loan using other known good sources (like other cash invested in CD's etc.)

I would also read very carefully as to whether there are any call provisions on the loan that you might not be aware of. This type of thing burned a lot of people in 2007-2009 who played this game.
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Old 08-11-2018, 03:22 PM   #6
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I must be missing something. It's already mid August, so the longest the low rate would last is about 4 1/2 months. Sounds like a lot of trouble for minimal savings. Unless your loan is $500K. And even then it's not a lot ot money.
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Old 08-11-2018, 04:58 PM   #7
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Originally Posted by beowulf View Post
I must be missing something. It's already mid August, so the longest the low rate would last is about 4 1/2 months. Sounds like a lot of trouble for minimal savings. Unless your loan is $500K. And even then it's not a lot ot money.


That’s what I was thinking.
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