At what variable interest rate would you pay off a HELOC?

[Fedup]

If this is a small amount like $100k vs $1 million portfolio for example. 2-5% you earn over the HELOC rate is spread out of the portfolio of $ 1 million, which is like .2-.5%. It works out to be less than money in MM.

 

[Texas Proud]

I never really answered the question, so I will...


I would pay it off when the cost of the loan is out of whack with what I can earn on my investment with the cash.... not what I can earn in stocks, but in a 'safe' investment...

I would also take into account my cash balance vs total investments as I would not want to deplete my cash and then have to sell stocks...

And another consideration is how much was borrowed.... I would think hard if I had to pay off $100,000 or more, but not much if less than $10,000....


So, the answer to your question is.... it depends....

 

[pb4uski]

I kind of smile at some of these discussions where a person is planning on future investment returns beating a short-term, fixed, interest rate. I just ran across an amusing quotation:

But in all my experience, I have never been in any accident … of any sort worth speaking about. I have seen but one vessel in distress in all my years at sea. I never saw a wreck and never have been wrecked nor was I ever in any predicament that threatened to end in disaster of any sort. (E. J. Smith, 1907, Captain, RMS Titanic)

I don't see where the quote is very relevant to the discussion. Given the theoretical construct of rates of return, investment returns are likely to exceed short term interest rates over almost any 3-5 year periods.

I am an averages player. I believe that is it most likely that my 60/40 portfolio will return more than my 3.375% mortgage and 1.9% car loan. If my pofolio return is less than 4% in then having the two loans will be the least of my worries. These loans total about 7% of my portfolio so if this little play goes sideways then there is no risk of ruin.

 

[jimnjana]

I have a small balance on a HELOC I could pay it off but letting it ride through peak spending months.

 

[Scuba]

Yeah, I had a car dealership try this approach on me. It was like "you take an 8% loan with us instead of paying cash and at the end you're money ahead cause you still have your cash!!" I told him, "yeah, I still have my cash, but I DID have to pay off your loan from SOMETHING, so I'm NOT money ahead. There's that pesky 8% in there that also has to be paid." He tried to argue with me.



I think Scuba can play the game to her advantage and no, I don't know how to figure when to pay off the Heloc. But playing the game sounds like work to me and that's why I retired. I've admitted to leaving money on the table in lots of ways - not the least of which was retiring early. We all have to play it the way we see it. No "right or wrong" just what works for each of us. I'm betting there's a calculator for Scuba's question - but I'm retired.



Oh, and I'd love to see (well, DW would especially like to see) what a $90K (plus) remodel looks like! We've done a kitchen/bath remodel for about $24K and then a second kitchen/bath remodel for about $40K in another place. Both of these were in Hawaii with the "Paradise tax" included. So what do you get for $90K - enquiring minds (nosy folks ) want to know.

Completely gutted and redid inside of 3 BR, 2 BA condo. New flooring throughout, changed ceiling height and a couple of walls (limited flexibility on this in a condo), new lighting throughout, new fireplace, new appliances, new cabinets, new countertops, new high end tile and plumbing fixtures in bathrooms, added steam shower, new window coverings, new bar with custom glass, new furniture throughout, new rug, new artwork. Got rid of texture and bullnose corners on drywall and repainted throughout. New interior doors & hardware. I'm sure I'm leaving some things out but it was a very expensive remodel. Decided we were keeping the place as our long-term primary residence so we spent whatever it took to create the environment we wanted, vs what the builder had put in 10 years earlier. This is in So CA so probably not as pricey as Hawaii but definitely not middle America pricing.

 

[Koolau]

Completely gutted and redid inside of 3 BR, 2 BA condo. New flooring throughout, changed ceiling height and a couple of walls (limited flexibility on this in a condo), new lighting throughout, new fireplace, new appliances, new cabinets, new countertops, new high end tile and plumbing fixtures in bathrooms, added steam shower, new window coverings, new bar with custom glass, new furniture throughout, new rug, new artwork. Got rid of texture and bullnose corners on drywall and repainted throughout. New interior doors & hardware. I'm sure I'm leaving some things out but it was a very expensive remodel. Decided we were keeping the place as our long-term primary residence so we spent whatever it took to create the environment we wanted, vs what the builder had put in 10 years earlier. This is in So CA so probably not as pricey as Hawaii but definitely not middle America pricing.

Thanks for the update. DW was impressed (and just a little bit jealous, heh, heh.) Enjoy!

Full disclosure on our remodel(s): We did almost all of the tear-out work. Then we did stuff like painting and other cosmetic stuff we were capable of. Additionally, we used some lower-cost help for the mid-level work. We paid as little as $20/hour for a handy "man" and $65 for a kitchen/bath "expert" and $110/hour (electrician).

 

[Scuba]

Thanks Koolau! We do love how it turned out, but it was a long and sometimes painful process. We hired a GC due to scope of work, plus we didn't have the interest or time or skill to DIY anything other than design & selection of materials. It also had to be permitted through the City and the HOA had to approve structural and plumbing changes. Too much for us to handle ourselves.