Has anyone ever used a home equity loan to pay off debt (at a lower interest rate)? Smart or bad idea?

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I am thinking about doing the same to take home equity to pay off credit cards, but I want to take 5 year fixed rate and pay off the whole balance in 5 years. Also EY 401k offers loans as well for lower rate and doesn’t require any paperwork, you get money in a week. HELOC usually takes weeks to get: employment verification, tax returns, house appraisal, etc.

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EY1 my house is worth about 150k more than when we purchased 2 years ago (according to recent comps on our block) which is why I'm considering this. Same situation where we want to get rid of our pmi and pay off some credit card debt

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Yes, I know lots of people who have done this. Keep in mind the deducibility of HELOC interest has changed so the benefit is likely less. That said, if you are paying off high interest revolving debt (credit card) your approach will generally still yield a better answer,especially if you make payments of both principal and interested start (many HELOC products only require interest payments for a specified period of time, say 10 years). Also note that HELOCs usually have a variable interest rate that adjusts with the market so your payment/interest is going to adjust accordingly.

I’m actually refinancing my house right now Bc we bought with an FHA loan. So we will get rid of PMI, lock in a lower rate, pay no closing costs, and pull out at least $40k for repairs etc. it’s called a cash out refi. We are only able to
Do this bc our house is already worth about 150K more than what we paid for it last year. Thanks, gentrification! 🙄

EY1 location?

EY1’s approach could be a better for OP because the “new debt” on the cash out would fall into your primary mortgage and the interest would generally still be tax deductible. The negatives from my perspective would be no flexibility of payment (you are locked into it vs interest only on the HELOC with option to pay more) and once it is paid down, you likely won’t have access to the money without borrowing it back should you need it in the future.

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