Replace your mortgage HELOC strategy

[chicagoliz]

Originally Posted by Dad01

I have no experience when it comes to the real estate market. In doing my due diligence and trying to learn as much as possible, I have come across a company called "Replace Your Mortgage". I am curious if anyone else has worked with this company and could provide their experience or thoughts in general about the company's HELOC strategy.

When it seems to good to be true it usually is, but this strategy does make a lot of sense at least on paper. Yes, when following this strategy the individual must be very diligent in keeping up with the cash flow required, but if they do, I do see how it makes sense even with the variable interest rate associated with the HELOC.
if they close the heloc line or call it due for any reason and you can not pay the heloc , can they forclouse on your house ?
Any thoughts/suggestions?

I don't know what their specific strategy is, but if it's anything like the credit card based strategy quoted in this thread, it's overly complicated.

To answer your question, YES. It's extremely unlikely they'd close the HELOC and call the outstanding balance due in full unless you have defaulted on the payments. And a HELOC is, similarly to a regular mortgage, a lien on your property.

I have known of people who have taken out HELOCs and used those to pay off their mortgages. Typically, they've been in their homes for a long time, so the balance on their mortgage is relatively low. And if interest rates have fallen significantly in the meantime, it can be easier to just take out a HELOC with a lower interest rate, pay off the first mortgage, and then make the payments on the outstanding balance on the HELOC (which, typically would be for a smaller amount than the mortgage had been, mostly because the principal is much lower, and combined with the lower interest rate, it can make sense).

But, if this is not the case, and you still have a significant amount still due on your mortgage, I'm not really seeing the benefit. If rates have fallen since the mortgage was taken out, you could just refinance (which is essentially just taking out a new mortgage, and replacing the old one). Typically banks offer HELOCs for rates that are higher than they are for mortgages, because if there is an outstanding mortgage, the HELOC is, at best, second in line if a foreclosure becomes necessary.

[turf3]

Quick, which cup is the peanut under?

That's all this kind of nonsense is.

[ACWhite]

My advice would be to check the terms VERY carefully. Contrary to the general info on the web, some HELOCs calculate monthly payments over VERY short amortization periods, such as 6-7 years after you take out the money. That makes for a much higher monthly payment than you might expect.