> Grant Shipley wrote: > Get a home equity line of credit (with a fixed interest rate) for 100% > of the value of your current mortgage. Then use the equity line to pay > off your mortgage. You now only have an equity credit line payment and > no mortgage. > > Next, put all your money you would have saved in a savings account in > the mortgage. Next, put all the rest of the money you wouldn't normally > pay on your mortgage in there too. Now, when you need to buy something, > just take out the amount you need.
This works fine, until the Prime Rate goes up. And then you are screwed with a capital 'S'. You've basically just put your entire lifestyle on a credit card, including your home. Woops. The beauty of a fixed-rate mortgage is that my payments will never change, even 10 years from now when interest rates are high again. (What, you think rates are going to go down after a 40-year low?) The other problem with this is that 98.6% of Americans do not regularly pay extra on their home mortgages[1]. With a line of credit, I'd bet most Americans would never pay it off, ever, since no one is requiring them to pay the principle. They'd just happily pay the minimum interest payment each month (what's the average credit card debt again?). Maybe you're more financially disciplined than that. If so, good for you. Go get a fixed rate mortgage and pay extra on it. Anyway, this kind of setup is great for banks. Banks want you to stay in debt for the rest of your life. How else could they build such tall buildings and pretty lobbies? --Dave [1] I don't have a source for this, so take it with a couple grains. You may want to conduct your own study and ask around. See if you can find even 1 person in 10 who regularly pays extra on their home mortgage. /* PLUG: http://plug.org, #utah on irc.freenode.net Unsubscribe: http://plug.org/mailman/options/plug Don't fear the penguin. */
