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Old 02-23-2010, 05:41 PM
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I have a VA loan at 7.5% (we were planning on moving so didn't refi). I have an interest only HELOC at B of America for 85k at prime rate. I owe just under 65k on mortgage, and since I can't seem to find anyone to refi such a small amount, I wondered if I could pay it off using my HELOC. My current payment including T and I is 850 a month. I would pay 1250 a month on the HELOC. Hoping that the prime wouldn't get above 7.5 in the 7 years it would take to pay the loan off.

Can this be done?

My concern is that when you pay off your mortgage, the bank that gave you a HELOC would want their money first.
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Old 02-23-2010, 05:55 PM
28,383 posts, read 67,903,744 times
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This has been asked before.

The simple answer is this is perfectly acceptable, and for some folks a smart move. Without knowing the details on why you might want to trade an $850/ mo payment for one that is about 25% higher (but I would presume much faster pay off) I would urge you to run the numbers to be sure that you are not sinking money into something that might now pay off.

The HELOC is, right now, a second mortgage and as such is subordinate to the first -- they cannot force you to pay them back before your decide what you do with the first. They would gain some legal right by you paying off the first and they'd then become the defacto first position lien holder if you defaulted. Some HELOCs have goofy clauses in them regarding the quality of the collateral, but that is generally understood to be an attempt to prevent from you doing some crazy renovation that makes you house less valuable, and it would take some creative lawyering to get anyone to believe you are trying to do anything other than save yourself some long term dough. Right???
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