I will have to go through the whole threadBlubbs wrote: ↑ I chose mortgage.
There is plenty of discussion in this thread.
home-equity-leveraged-dividend-growth-i ... d-2455354/
but what was the reason you chose 2nd mortgage?If you have to ask, please don't take this money out to invest. Go for a vacation instead... you'll end up with similar returns. Just my 2 cents.rfd911 wrote: ↑ I apologize if this has been already discussed. If you had the option to take out $100K either as HELOC or Home Equity Loan (aka 2nd mortgage) to invest in monthly income ETFs, which one would you do? Please note that this HELOC will not be re-advanceable. Does one make better financial decision over the other?
HELOC rates are higher but you have the option to pay only interest which is gonna be deductible either way. You are correct that you can get higher amount with home equity loan.
I wonder though.... the difference in interest between the two is ~1.3% (3% HELOC vs 1.7% 2nd mortgage). The money that you are forced to pay to the principal with the 2nd mortgage option, would that give you a return greater than the interest difference if it was invested and compounds?reversi wrote: ↑ It really is a trade off of lower rates (mortgage) vs flexibility or both withdrawing and repaying (HELOC).
I started with a HELOC, but rolled it into a mortgage when I was able to locked in a fixed rate of 1.69% for 5 years.
Personally, I’ll take a lower rate over flexibility any day. But both decisions are fine, and it’s a matter of personal choice.
Spreadsheets are my best friend my man. And kind of ironic that I’m actively paying off my debt (albeit very slowly) when I encouraged you not to do so a couple of years ago.MrMikeDD wrote: ↑ I wonder though.... the difference in interest between the two is ~1.3% (3% HELOC vs 1.7% 2nd mortgage). The money that you are forced to pay to the principal with the 2nd mortgage option, would that give you a return greater than the interest difference if it was invested and compounds?
To put another way:
- With a 2nd mortgage, you're saving 1.3% a year in interest AND your loan is getting lower.
- With the HELOC, you're able to reinvest more because you're only paying interest (no principal).
I'm not sure how to do the math to figure out which is better. I would guess the HELOC is better because I don't want the HELOC (or 2nd mortgage) to go down - I want my investments to compound and go up - that's just my gut guess though on which gives better returns.
I also went the HELOC route (as I'm capitalizing interest, which makes cash flow even greater for me) as well. Like you mentioned, it allows me to compound much faster even though interest rates are getting higher.MrMikeDD wrote: ↑ I wonder though.... the difference in interest between the two is ~1.3% (3% HELOC vs 1.7% 2nd mortgage). The money that you are forced to pay to the principal with the 2nd mortgage option, would that give you a return greater than the interest difference if it was invested and compounds?
To put another way:
- With a 2nd mortgage, you're saving 1.3% a year in interest AND your loan is getting lower.
- With the HELOC, you're able to reinvest more because you're only paying interest (no principal).
I'm not sure how to do the math to figure out which is better. I would guess the HELOC is better because I don't want the HELOC (or 2nd mortgage) to go down - I want my investments to compound and go up - that's just my gut guess though on which gives better returns.
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