What a dilemma to have….

Okay, so this crazy economic environment has given me a scenario that I thought I would never have to contemplate.  My mortgage is an interest only 4.5% and my equity line, that I use as my money tool is at 4% interest only.  Which one should I pay down?  So the house is officially my most expensive debt, being that both are tax deductible doesn’t make it easier.  Now I have some 0% cc’s riding right now, which I always have floating out there but that is free money, when it comes due I will put it back on my equity line.  Of course I am always on the look out for 0% deals, I hold 9 different CC’s for this purpose, ranging from 9K to 26K.  These days they are being stingy with their deals, and a lot are charging a 3% transaction fee.  So I go out every month or so and go through to see if anyone is offering any deals AND I look at that pesky junk mail, which isn’t pesky at all, it is filled with free money as long as you know how to play the game.  If I run across something, I do a quick break-even analysis.   I created this nifty little spreadsheet, that takes into consideration tax-deductible vs consumer debt, then plug in the fee and see if it makes sense.  If it does, I pay down my equity line and start paying the min. payment on the card, once the offer expires, whatever balance is remaining, I throw it back onto the equity line.  And no it is not illegal nor cheating, it is actually following the rules of the credit card game, the one mistake credit card companies make, they assume people aren’t smart enough not to get “stuck”, meaning they intend to jack up the rate once the teaser rate is over, well, I just decide not to use the card after the teaser rate is over, my choice, I move the money off the card.  Hence why I call my Equity Line my Money Tool.  For probably 10 years now, I have been doing this, and I always throw any money I have after paying bills onto the equity line.  For the first time, my equity line is no longer my “most expense” debt, the house is.  This is why I call it a dilemma, certainly not a problem, just a dilemma….any suggestions anyone?

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~ by debt2dreams on November 21, 2008.

3 Responses to “What a dilemma to have….”

  1. Is your mortgage rate variable or fixed?

  2. Oh sorry, that is what makes it such a dilemma, it is a variable….it is going to adjust….here is the kicker…..down to 3.75%, if the 1 year US treasury forecast is correct. Then it will be locked in for a year at that rate. After thinking about this, I will see if prime goes to 3.5%, if so I will start paying down the 4.5%, then if prime starts to move upwards I can go back to paying equity line. I was going to get into a fixed rate mortgage but why would I give up such a fantastic rate….

  3. Okay, update on the dilemma, we are going to chunk money down on the 4.5% mortgage, since it will be adjusting and recalculating the payment 04/09, if we pay down the principle, our payment will be lower. That means we will have more cash flow to throw towards the highest interest rate, either Mort or equity line whatever it may be going forward. Again not a bad problem to have at this point. All bets are off if we can get a fixed 30 year just under 5%, then I will combine both together and lock it in.

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