When taking a home equity line of credit (HELOC) makes economical sense for medical residents
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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 Bad Credit Loan
You are completely right, HELOC is the key solution to this problem.
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?
Comment by Jerry
HELOC would lead to a lower rate, for sure, but I would want some insurance that I’ll be in the home for a while… does that make sense? What if you want to move right after your residency?
Jerry
www.leads4insurance.com
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Comment by Lee Matthews -- Financial Concepts West
“For those of us that own a home, we can get a HELOC.”
Yes, but a HELOC is much more flexible than being able to be used to payoff student loans. You can use it as an interest cancellation account to payoff your home mortgage much faster than listed on your mortgage amortization schedule:
More and more folks are using a Home Equity Line of Credit (HELOC) or a business-line-of-credit (BLOC) or personal-line-of-credit (PLOC) as an interest cancellation account to accelerate their home equity and payoff their home *years* sooner than listed on their mortgage amortization schedule.
Unfortunately, today’s Real Estate market means that folks can no longer count on appreciation to build home equity. Those who realize that they need to pay down their current mortgage debt are looking for alternate ways to aggressively (yet safely) build equity.
And they’ve discovered a perfect online system to do that; they can focus on their wealth accumulation goals while accelerating their equity simply by using a Home Equity Line of Credit to ‘power’ the Money Merge Account™ financial solutions program.
A typical 30 year loan (of whatever type) can be paid down in 1/3 to 1/2 the time — it’s a great way to save *huge* amounts of income by eliminating a mortgage amortization front-end interest load. (On a million-plus dollar home, I’ve personally seen where the Money Merge Account™ program will save the homeowner $750,000 in interest charges!)
And the best thing – homeowners don’t have to refinance their existing mortgage or, in most cases, make any adjustments to their lifestyle.
It is unfortunate that most of us were never taught to follow three essential principles: (1) Avoid paying interest, whenever possible, (2) Use other people’s money, whenever possible and (3) Find and use a financial system that will guide you, especially if you have the tendency to go off-track. The Money Merge Account™ software and the program’s counselors use these principles to keep each homeowner focused on their wealth accumulation goals.
I’d be happy to provide further details…
Comment by Mortgage Claims
Well…
The best thing – homeowners don’t have to refinance their existing mortgage or, in most cases, make any adjustments to their lifestyle.
And one important thing 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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Comment by Lee Matthews -- Financial Concepts West
“The best thing – homeowners don’t have to refinance their existing mortgage or, in most cases, make any adjustments to their lifestyle.
And one important thing I have noticed that HELOC makes sense if you have a large student loan. But what happens when the loan is small?”
The program works with HELOCs as small as $10K.
Comment by julieana smith
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Comment by Wanda
Nice article. Really enjoyed it.
Comment by mas
Hi,
Thanks for the quality articles and nice comment too
Comment by Equity Home
Yeah..HELOC is the solution
Comment by Karen
HELOC would be nice, let’s cooperate with this..
Comment by Karen
by the way, thanks for sharing this article, this is awesome!
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.
If you agree, perhaps you could link to my site.
Thanks for your time and consideration.
Sincerely,
Brian Carty, MD, MSPH
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
Comment by House Refinancing
Great post, really enjoyed it. I will have to bookmark your site for later.
Comment by Angie
I think the most important step is to be realistic in what you can and cannot do. I’ve seen so many first time home buyers jump into something they cannot afford only because they have big dreams.
Do your homework done first if you are thinking about taking out a loan or mortgage. The time spent looking into your options can save you a good deal of money later on.
Comment by Carin
On November 19, 2007 I left a comment on your blog: http://www.financephysician.com/2007/06/25/the-finance-physician-tells-you-how-you-can-survive-the-er/
Please remove my comment as further information suggests that spam is being allowed on your site. Not only is this harmful to search engine status, but it also encourages an, in our view, an unethical practice. Please remove our original comment, as well as this one once the original has been deleted.
Thank you for your co-operation
Carin
Comment by Jet Spyke
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Comment by Refinancing Home Mortgage
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