Paying off a mortgage with a home equity line?

[JustMe]

Does anyone know anything about this? It was suggested to me in place of refinancing, as my mortgage balance does not meet the minimum of some of the refinancing options available but my current mortgage interest rate is high? Any disadvantages, things to look out for, ways to find best rates?

thanks,

[niccig]

Our home equity loan is variable rate. At the moment it's 4.78%, but there have been times when it was around 9%. I would be worried about doing that for a large amount of money. We've been OK, because of DH's work, and we're aggressively paying the amount down. It should be gone in a year.

[JustMe]

Thanks, I would only get one with a fixed rate. Any dangers/things to look out for with this?

[KrisM]

I am not a specialist, by far. But, I'd think that it might have a shorter term to pay back, so higher payments. Check that, I suppose. Otherwise, it seems like it would work.

If you're interested in a regular mortgage, you might find one for lower amounts. One place I called was going to charge 0.25 points for a lower balance, but I did find one with no cost and great rates. Took some calling around though.

[HallsofVA]

The fixed rate is definitely important.

Also, be sure the check the tax deductibility of the interest on the home equity line if that's important to you. Your mortgage is probably deductible but many times home equity interest is only fully deductible if it was incurred on home improvements and not on refinancing or other uses.

[Piglet]

We just did this in Canada, so it is different from the US, but the one thing that caught us off guard (after we had signed the papers) was that we couldn't pay it down bi-weekly like we pay our mortgage. Somehow the line of credit was only payable 1x per month if we paid automatically. We used to do a bank deduction every 2 weeks with our mortgage. Just something to look into, if that is the away you pay your mortgage.

[EllasMum]

I hate to disagree with Marina (Piglet), but I will. ;) I have a home equity line of credit that serves as my mortgage. I have a fixed portion that has an interest rate of 5.15%, and I pay biweekly, on an automatic withdrawal system. The remaining part of the line of credit has a revolving interest rate, which right now is only 2.5%! Pretty sweet. As I pay down the fixed portion, more becomes available to me in the revolving portion. I really like this setup. I am able to make additional payments, I believe 2 times (??) per year. Works for me!