When taking a home equity line of credit (HELOC) makes economical sense for medical residents
This probably sounds like the most stupidest thing that you can do right now given the situation with the mortgage market right now but if you hear me out it may make the most economical sense for the most diligent. The big question for all of us is “How will the fed interest rate cut affect my student loans?” The answer is that you have a fixed loan right now so no matter how much the fed cuts interest rates, it will not change the fact that your fixed interest rate at 6.8% will stay that way for the life of the loan.
So how do you get around that? For those of us that own a home, we can get a HELOC. I don’t own a home so I won’t be able to take this roundabout way to save money. With the rate at 3 percent right now and probably a few more cuts to go, HELOCS or home equity lines can be had fore much cheaper. Not only that, you can take an additional tax deduction on the interest you pay on the home equity line.
Student loan interest deductions are limited to 2500 dollars so anything above that will not be discounted and thus we don’t get any breaks north of 2500 dollars on interest. For me, I average about 1000 dollars of interest a month so I pay an additional 12K of interest a year from my loan interest alone.
Does this make any sense? maybe or maybe not. This may make more sense if you have a large private loan that is variable and currently running 8% and could also apply to the nonsubsidized Grad Plus loans that are fixed at 8.5%
Home Equity Lines can go for based on Bankrate.com from 5.9 to 7.8% which doesn’t include the tax deduction you get on top of that.
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Comment by Smelly Feet
I have noticed that HELOC makes sense if you have a large student loan. But what happens when the loan is small?
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Hi,
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Comment by Karen
HELOC would be nice, let’s cooperate with this..
Comment by brian carty
Dear Dr. Finabcem
I am an internist with a medical news website, Hot Medical News http://hotmedicalnews.com which your readers may be interested in.
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Comment by Jordan
I already have a HELOC in addition to my primary mortgage. I got these at the same time when I purchased my home in order to acoid PMI. The thing is, my LOC is at 8.25%. I noticed from your post that LOC’s are now as low as 3%.
Is there anyway to transfer my 8.25% LOC to a lower 3% much like what can be done with credit cards at high rates?
Thanks
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Comment by Forex
I am having a doubt that how much tax penalty I have to follow if I sell at variable rate mortgage? Thanks nice information you have given.
Forex Income
Comment by jc12
Can you even still get HELOCs now?
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Comment by Bad Credit - Easy
Good sound advice but just be weary that alot of people will still take this advice when interest rates start to adjust upwards in the future to help stem the inflationary pressures.
This will start happening from the middle of this year up as the printing presses push out too much money for the system to handle.
Comment by Aaron
The thing you need to be careful about right now is that your HELOC will be frozen and you will no longer be able to draw from it. This is happening with a lot of banks now as the credit crunch continues. That being said, a HELOC truly is a great vehicle to help pay off debt. I’ve written a book all about it with many creative and innovative ways to utilize HELOCs. It can be downloaded here: http://thepayground.com/heloc_home.html
Comment by i-gordiy
This will start happening from the middle of this year up as the printing presses push out too much money for the system to handle.
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