Using your HELOC to pay for itself
For a couple of years now I’ve been paying a large monthly interest only payment on a home equity line of credit (HELOC) that I had used for a real estate investment. I always thought that it would be a cost that I had to incur for the ability to grow my net worth. I was shocked to find out after reading a post on Million Dollar Journey that I have been giving my bank my hard earned cash for no reason.
As suggested in this post I could use the HELOC to fund itself by simply writing myself a check out of the line of credit and redeposit said money back in to cover the interest only payment. The post suggested that not all financial institutions would allow this, so I made an appointment at my bank (TD Canada Trust) and asked the question. The answer was “sure - no problem”. Holy cow! I just saved myself $600/month. What a windfall!
Now, I know what you’re going to think — when I was younger and not great with money, I used to do a cash advance on my credit card to make the card’s minimum monthly payment. The difference here is that I now have created much needed capital to reinvest on other projects that will only increase my net worth, rather than blindly handing my money to the bank.
I actually stumbled across this very important point while researching the “Smith Maneuver”. I want to do much more reading before commenting on the much touted financial plan, but I want thank Million Dollar Journey (financial blog) for opening my eyes and fattening my wallet.
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