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When I last refinanced my mortgage back in 2017, I had just a couple years left on my old 15yr mortgage, but a large HELOC balance. Taking advantage of low rates, I rolled the HELOC and the mortgage balance into a new 15yr mortgage that I anticipated would be paid off around when I retired.

At the time, I did not want to open a new HELOC. That would prove to be a fateful decision as I could have really used a credit line during my nearly 2 years of unemployment in recent years and would have given me an alternative to tapping retirement savings.

Now I find myself in a position where I've been working for six months, have very advantageous credit scores, but I know my current contract could come to an end. Plus, I have some major home repairs ahead of me, and I could tap the HELOC instead of the eFund that I've only just repaired this summer. I have 2/3 equity in my home, and could borrow against another third. My goal would be to not hold any long term debt but pay it down as quickly as feasible.

The question I have is whether to go with a fixed HELOC at 5% (5yr draw period, 5yr repayment period), or an adjustable HELOC starting at a minimum 4% and tied to prime (10yr draw period, 7yr fixed repayment period). There is no initial draw requirement, no prepayment penalties and closing casts are locked at $630.

Trying to predict where rates are going to go is as fruitless as trying to time the market, but my thinking is that given the current coronaeconomy, rates will probably remain low for a few years to come.

For the Adjustable, Prime will have to rise above 4% before the adjustable moves at all. But if it does start moving, I expect it would move past the 5% of the fixed rate before too long. I would have twice as long a draw period (getting me closer to retirement), but my repayment rate would be fixed at whatever the rate is in 10 years.

With the Fixed, For a cost of 1%, I don't have to worry about rate movement but the draw period is half that of the adjustable, and the repayment period is 2 years shorter as well. However, if I treat the HELOC like a promotional credit card offer and follow a payment plan to erase the debt (and reduce interest payments), I might be able to live within the shorter time periods.

I need to move quickly because I want to make a decision on the home repairs quickly.

Fuskie
Who notes he also could have the option of financing the repairs at 0% over six months or 5% over 48 months...

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