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1st Mortgage or HELOC - Paydown

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    1st Mortgage or HELOC - Paydown

    Looking for some sound advice

    First mortgage is 350K 6.25% fixed, 30 years. HELOC is 37K at 4.5% adjustable.

    We are paying $400 monthly over the statement amount for the HELOC, and adding about $200 more a month on the 1st mortgage.

    Question: Should I redirect that $200 towards the HELOC to help pay it down faster or should I continue chipping away as I am doing on both? My thought is that in the near future that HELOC will start creeping or jumping back up...

    I think you're doing the correct thing.
    If you want to get that HELOC loan paid off faster, then devoting the whole amount makes sense.
    On the other hand, I don't think rates will shoot up rapidly.
    You'll have time to make the adjustment when they start to move.


      burnesj, I'm doing what you're doing - paying more on the lower HELOC rate in preparation for a rate increase. I would put all my money toward that since I hate the uncertainty of variable rates.


        You could pay off HELOC (home equity line of credit) even early in the draw period. Although during the draw period only interest is required to pay, paying towards the principal is usually possible and recommended. Some people use a HELOC as an emergency fund, but they also stick to another emergency fund, as well.

        If you have other debts, as you probably do, you will need a tax advisor to calculate which debt is better to pay off, since your income will influence the level of tax deductibility. Paying off your HELOC first almost only makes sense if you have government backed debt.