HELOC paydown vs. 1st Mortgage paydown. Which first?

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Topic Author
supernova72
Posts: 78
Joined: Fri May 17, 2013 8:58 pm
Location: Seattle WA

HELOC paydown vs. 1st Mortgage paydown. Which first?

Post by supernova72 »

Hello,

I'm torn on which loan to paydown first between a recent HELOC (used car purchase) and my first mortgage.

The scoop:

Mortgage:

4%, 15 yrs, $207K (refied in July of 2011)
balance is now $128K
Home value $500K
Been paying approx $600 a month extra principle the last three years (pre car purchase)

HELOC:
3.99% variable
$26K balance
2014 M235i ($37K value wholesale)
Guessing it's depreciating about 10% per year.

Since the car is depreciating and the house is appreciating (Seattle WA) should I apply the entire $600 to the HELOC? I just can't figure it out for whatever reason. I'm currrenly splitting it 50/50 between the two loans.

Someone will probably ask why I'm doing a HELOC for a car. Good question. I like the flexibility actually and can still itemize at tax time if that helps.
zeeke42
Posts: 80
Joined: Sat Feb 14, 2015 5:13 pm

Re: HELOC paydown vs. 1st Mortgage paydown. Which first?

Post by zeeke42 »

HELOC first, for two reasons:
1. They're currently the same rate, but the HELOC can go up and the mortgage cannot.
2. Flexibility. If you pay down the HELOC, you can draw again if you need emergency cash. Paying down the mortgage doesn't change your cash flow until you refi or pay it off.
bigred77
Posts: 2042
Joined: Sat Jun 11, 2011 4:53 pm

Re: HELOC paydown vs. 1st Mortgage paydown. Which first?

Post by bigred77 »

Not that it's a huge deal but you could probably refinance both into a 15 year mortgage and cut your interest sate to 3% or less. Just keep paying what your currently paying and your payoff date would happen even faster.

You could also look into a 10 year refinance if terms are worth it.
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Toons
Posts: 14007
Joined: Fri Nov 21, 2008 10:20 am
Location: Hills of Tennessee

Re: HELOC paydown vs. 1st Mortgage paydown. Which first?

Post by Toons »

I agree with the Heloc
Well explained already :happy
Then work on the mortgage
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee
Topic Author
supernova72
Posts: 78
Joined: Fri May 17, 2013 8:58 pm
Location: Seattle WA

Re: HELOC paydown vs. 1st Mortgage paydown. Which first?

Post by supernova72 »

zeeke42 wrote:HELOC first, for two reasons:
1. They're currently the same rate, but the HELOC can go up and the mortgage cannot.
2. Flexibility. If you pay down the HELOC, you can draw again if you need emergency cash. Paying down the mortgage doesn't change your cash flow until you refi or pay it off.
Thanks for the feeback and good point on the emergency cash part!
Topic Author
supernova72
Posts: 78
Joined: Fri May 17, 2013 8:58 pm
Location: Seattle WA

Re: HELOC paydown vs. 1st Mortgage paydown. Which first?

Post by supernova72 »

bigred77 wrote:Not that it's a huge deal but you could probably refinance both into a 15 year mortgage and cut your interest sate to 3% or less. Just keep paying what your currently paying and your payoff date would happen even faster.

You could also look into a 10 year refinance if terms are worth it.
Good point. I went through the analysis of a 3.25% refi on a 12 yr "No Fee" loan and keeping the overall payment the same. It saved me 2 months which was surprising to me. Maybe it's because I've already taking two yrs off the loan?
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