HELOC to Pay Off Rental

[Joe Garretson]

Hey I'm working through a scenario to do some loan rate arbitrage to pay off a conventional high rate mortgage on my investment property. 

I have a rental with a loan balance of $111,000 at a 8.5% rate. Refinancing right now gets me down to mid 7s but with closing costs, it doesn't make much sense to save $75/month.

My primary loan balance is $360,000 and worth roughly $750,000. I have a $28,500 HELOC out that we used to finish the basement.

I'm pondering the idea of taking a HELOC out on my primary to pay off the investment property loan. I've run the math a couple different ways and it all shows a net positive outcome over 3-5 years which I plan to move on from this property in that window.

There are some banks that are offering intro rates for a year and then there should be options after a year to stay in the HELOC or get into a fixed rate product.

What am I missing?

[Jonathan Greene]

It never makes sense to me to take second loan out on something (even if it's on the equity portion) to pay off a separate loan. You would be losing one loan, which is good, but you would be levering your primary higher. The rates from HELOCs just aren't good enough for it to make enough sense to me.