# HELOC’s and Interesr

9 Replies

The interest on a HELOC are paid on my present balances each month during my draw period? Or is my interest only starts kicking in after the draw period ends and whatever my balance is then? Thank guys in advance.

For example: If my credit line is \$400,000. And I spend \$200,000 in 1 month. Whatever my interest is 4.8%, I will be charged \$9,600 in interest I have to pay that month?

Arthur Voskanyan

@Arthur Voskanyan , you only pay (what ever your interest rate % is) on the amount of money that you have used up and til that point. So as an example: CRL= \$400,000 and you only spend \$200,000 @ 4.8 % your payment if it is interest only is \$800 a month. Just to be clear the example that I am using is for an interest only payment on your HELOC. Hope this helps, here is to wishing you success in your REI ventures!

\$800/month because you divide it by 9,600/12?

So, what about principle? Are most HELOC’s structured with principal and interest or just interest? Is that included in my monthly payment?

Will that \$800, I will pay every month until I pay down the principle? If I just leave the balance at \$200,000 it will charge me the \$800 over and over again every month?
Arthur Voskanyan

Originally posted by @Arthur Voskanyan :

So, what about principle? Are most HELOC's structured with principal and interest or just interest? Is that included in my monthly payment?

Will that \$800, I will pay every month until I pay down the principle? If I just leave the balance at \$200,000 it will charge me the \$800 over and over again every month?
Arthur Voskanyan

Using that example, \$800/m wouldn't be paying anything off the principal. In 5 years, you'd still owe \$200k (even though you'd paid back \$48,000)! But theoretically, you wouldn't even need to pay \$800/m, because your redraw facility is for \$400k. But like credit cards, no doubt they'd have a "minimum monthly payment" based on the amount you already withdrew, balanced against how much you could still withdraw. [Remember, HELOCs are different than mortgages].

Brent,
But if I don’t pay that interest of \$800/month, wouldn’t it add to my total principle and the next month it would be 4.8% off \$200,800? The new balance with the \$800 interest?

Arthur

Originally posted by @Arthur Voskanyan :

Brent,
But if I don’t pay that interest of \$800/month, wouldn’t it add to my total principle and the next month it would be 4.8% off \$200,800? The new balance with the \$800 interest?

Arthur

Yep. Then if you still don't pay anything, next month it'd be 4.8% onto \$201,600, and so on!...

Brent,

So what type of purchases can I make with this loan? Can I buy a vehicle in full amount? Will vehicle accept it if it’s a form of a credit card that my line of credit is issued? I can use it as down payment on multiple properties?

Arthur

Originally posted by @Arthur Voskanyan :

Brent,

So what type of purchases can I make with this loan? Can I buy a vehicle in full amount? Will vehicle accept it if it’s a form of a credit card that my line of credit is issued? I can use it as down payment on multiple properties?

Arthur

Yep. It's like a big fat Credit card. But, is using it to buy consumables (like a car) a good idea? That's a whole different question! One that relies on your income, to match your lifestyle!

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