When we bought our house last summer, I ended up taking out a $16,500 Home Equity Line of Credit to satisfy the 20% down rule and eliminate any PMI charges and secure a lower rate on the 30 year fixed mortgage I was taking out. Well I’ve widdled this down to a little under $6,000 in the first year, but I’ve kind of hit a wall now. Basically last two months I haven’t been able to make anything but the minimum payment on my HELOC and well the damn interest rate keeps going up, so I am thinking about playing the balance transfer game to pay off the HELOC for at least the next 12 months go give us some breathing room and save us about $42 a month in interest charges stemming from the HELOC. On top of that technically my HELOC will owe my Roth IRA accounts about $8,000 come Jan 1, so my HELOC still has some bite in it at this point and I’d be earning interest off of some credit card companies money rather than paying the mortgage company hard earned cash each month.
Now don’t get me wrong, I’m not in dire financial straights and looking to take out a balance transfer just to help pay the bills. I could easily pay off the HELOC if I wanted to, but that means I would either have to delay/skip maxing out my and/or my wife’s Roth IRAs in 2007 or lower my 401k contribution percentage below 17.5%. Basically I’ve got about $18,000 a year that I am putting away for retirement, so I’ve got a little wiggle room if things get tight. But the point is I don’t ever want to get to the point where I need to descrease or for that matter stop increasing my retirement contributions. If some credit card company will give me free money to play with I think I’ll take them up on it.
I have no credit card debt, nor have I ever or will I ever have any credit card debt (above 0%) and really I think I’ve just strung our household income to the limit with the amount I am contributing towards retirement. Currently that $18,000 makes up 32% of our household income and every penny of that $18k is after-tax money, add in Mortgage/Heloc and we really aren’t living on much.
If anything I will just take out a balance transfer for 12 months, pay off the HELOC, and put the extra in a high-yield savings account. Keep adding to the high yield savings account throughout the year as money frees up, and then worst case scenario I wasn’t able to come up with any extra money to pay off balance transfer in entirety, I’ll just pay of the balance transfer card with the HELOC, or do another balance transfer (BTW I doubt this will be the case). No matter what it will save me the $42 a month I’m currently paying on my HELOC and any interest from the extra money. That’s still a minimum savings of $500.
Anyway MyMoneyBlog seems to be the balance transfer expert so I am reading up and learning over there. It looks like Citi is the best company to do this with, but if possible I’d like to use Chase as the rest of my accounts are with them. We’ll see and I’ll keep you posted as I go through the process.