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Money Question / Mortgage / HELOC - $12,500

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  • Jun 19th, 2013 12:38 am
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Sr. Member
Jul 2, 2008
610 posts
48 upvotes
Toronto

Money Question / Mortgage / HELOC - $12,500

I have some money coming in at the end of the month. $12,500

Option 1.
Pay HELOC 3.5%, I owe $30,000

Option 2.
Pay Mortgage 3.0% Fixed until 2016, lump sum, owing balance is $270,000.

Both ways I cut down debt by $12,500. I don't want to put in RSP, TSFA, I have enough in those. Basically Option 1 or 2?
I do plan on buying a new house in 1.5 - 2.5 years.

What way will I be ahead more?
9 replies
Deal Addict
May 2, 2007
3013 posts
270 upvotes
Kingston
I say the balance of the 3.5% loan and any cc you have.
Sr. Member
Jul 2, 2008
610 posts
48 upvotes
Toronto
That is what I am thinking ... Isn't the mortgage a better idea though? higher amount owing paying larger interest? or the interest saved is a lower amount because the rate is .5% difference?
$0 CC debt.
Deal Addict
Feb 15, 2013
2445 posts
573 upvotes
Flip a coin. Both options are essentially identical.
Member
User avatar
Mar 2, 2010
452 posts
44 upvotes
Always pay down the debt with highest interest rate first. Only reason in this case for paying down mortgage, instead of HELOC would be if HELOC interest is tax deductible. If you are not deducting HELOC interest rate, pay it down first.
Deal Addict
Dec 5, 2003
1456 posts
158 upvotes
n2d2 wrote: Always pay down the debt with highest interest rate first. Only reason in this case for paying down mortgage, instead of HELOC would be if HELOC interest is tax deductible. If you are not deducting HELOC interest rate, pay it down first.
+1 or if you plan on doing a huge debt repayment next year and want to make use of your annual repayment privileges on your mortgage. I'd do HELOC and if you need the money again, rotate it back out.
Banned
Jan 3, 2013
581 posts
25 upvotes
PORT MORIEN
raxa wrote: I have some money coming in at the end of the month. $12,500

Option 1.
Pay HELOC 3.5%, I owe $30,000

Option 2.
Pay Mortgage 3.0% Fixed until 2016, lump sum, owing balance is $270,000.

Both ways I cut down debt by $12,500. I don't want to put in RSP, TSFA, I have enough in those. Basically Option 1 or 2?
I do plan on buying a new house in 1.5 - 2.5 years.

What way will I be ahead more?
Where is this money coming from?
Sr. Member
Jul 2, 2008
610 posts
48 upvotes
Toronto
Some stocks I plan on selling, I don't wish to reroll that particular money into other stocks.
Sr. Member
May 3, 2013
760 posts
475 upvotes
Toronto
raxa wrote: That is what I am thinking ... Isn't the mortgage a better idea though? higher amount owing paying larger interest? or the interest saved is a lower amount because the rate is .5% difference?
$0 CC debt.
Pay the one with higher interest first, unless there's tax considerations.
Banned
Jan 3, 2013
581 posts
25 upvotes
PORT MORIEN
raxa wrote: Some stocks I plan on selling, I don't wish to reroll that particular money into other stocks.
why not? people keep saying stocks are growing fast!

Personally I am looking for a right time to buy the GLD.

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