So I been thinking about buying my first home. I saw youtube and other resources saying that heloc is better and faster to pay down your mortgage. However, heloc just doesn't make sense to me. It has higher interest rate and by using it to pay your mortgage down you would still owe original loan. Can anyone explain to me why would anyone actually do this?
Here is my example.
House price 400k downpayment 80k @20% mortgage amount 320k @4% interest Heloc amount 100k @8% interest ------------------------------ put 60% heloc against mortage principle 60k new mortgage amount 320k - 60k = 260k Now you have 260k with 4% interest and 60k with 8% interest + your other expenses. On top of that you would still pay your original mortgage monthly and your entire check would only deduct little from your heloc account biweekly (assume biweekly pay).
How is this better than the conventional loans?