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Investing Heloc money?
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Posted by jane__ny (My Page) on Fri, Jan 8, 10 at 22:45
| We are due to close on our home end of Feb. We have $25,000 Heloc which we haven't used. We pay 3.04% interest on the Heloc. Could we take the 25,000 and invest it before the closing? Is that legal? Just wondering as we could make more interest investing it than we'd pay for one month.
Thanks,
Jane |
Follow-Up Postings:
RE: Investing Heloc money?
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| If you pay off the HELOC, you'll be getting better than 3% on your money. Which is more than you will get anywhere else. |
RE: Investing Heloc money?
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| sushipup, the way i read this is that Jane has NOT used the Heloc, and could borrow at 3.04%..I believe she wants to know if she could borrow and invest it short term..The answer is yes, i have done such...The trick is trying to earn more then the interest on the loan in a short period of time..Not easy |
RE: Investing Heloc money?
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| qdwag is right. I'm thinking if I take the $25,000 and invest it into something, I'd make money from it. I have to pay the heloc at the closing in Feb. from the sale of the house. Even if I stick it in the bank until I decide what to do with it, I couldn't borrow money for less than 3% anywhere. |
RE: Investing Heloc money?
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| So this is money that you have to pay back in a few weeks? Any short-term investment that could possibly make more than 3% on an annualized basis (which would also be taxable, don't forget that) would come with risks. What if you invested the money and lost 10% of the value of it? So I still wouldn't take the money, not unless you have a strong stomach for risk and can handle the loss. |
RE: Investing Heloc money?
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| I was thinking short term bonds or something that would pay 4-5% tax free. Thats why I posted - maybe someone has an idea. Jane |
RE: Investing Heloc money?
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jane-
Don't mess with this. It makes no sense. If you somehow got $25,000 of tax free bonds at 4%, your return -- after you subtract the 3% to the bank -- would be 1% on an annualized basis...which would be $250, or about $20 for a month. And that's if you could even find a safe investment that you could get in and out of in a month, which is highly unlikely. Is it really worth the time and risk to possibly make $20? |
RE: Investing Heloc money?
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| You are right. Doesn't make sense when you do the math...which I didn't. Thanks,
Jane |
RE: Investing Heloc money?
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| I was wondering if you need to make it short term, the HELOC will be paid off at closing. You can still keep your investment if you have equity in the house, what are your future plans for your money? |
RE: Investing Heloc money?
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| cmarlin20, that's what I was thinking. It would be cash and I could invest it. There are stocks paying over 6%. Maybe some tax free municipals. Just playing with the thought. It will be paid off with the sale but would give us some cash to 'play' with. |
RE: Investing Heloc money?
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| Had to chime in on this. At a very basic level, I think it is a dangerous habit to play with borrowed money. Especially in an uncertain market. Very few safe havens out there, and fixed income investments are mired by the low interest rates. Also, you have to consider transaction fees, on and on. Just bad policy, in my view. |
RE: Investing Heloc money?
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| If you were to do this - and mind you, I still think it's not a good idea - the only thing worth investing in would be Roth IRAs for both of you. The tax-free compounding in no-load mutual funds in a balanced asset allocation (say, 50-50% bond funds/mutual funds) would be possibly worth it over the years. |
RE: Investing Heloc money?
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jkom51-
I agree it's a bad idea. In addition, though, the OP was intending to invest only until the end of Feb, so a Roth wouldn't work, unless I'm missing something here. |
RE: Investing Heloc money?
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| I agree with a previous poster. You never invest with borrowed money! |
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