realworldknowledge wrote:
Quote:
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He avoids the possiblity of rates going up before he needs the full amount. Not a bad plan IMO, unless he doesn't need the funds very soon.
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It's a bad plan.
Let's play with simple math and per annum interest just for fun.
$40,000 loan @ 4.5% equals
$1,800 interest paid per year.
$40,000 @ 3.6% money market account equals
$1,440 interest earned per year resulting in the
loss of $360 dollars.
But wait, this money is earmarked to be spent on home improvements....the "spent" money doesn't reside in the money market account.
$40,000 loan @ 4.5% equals
$1,800 interest paid per year.
$30,000
spent on home improvements leaves $10,000 in money market account that earned
$360 per year.
Total out of pocket interest paid is now
$1,440.
Hmmmm, great, I'm EVEN..... no loss, no gain? Right?
No silly!
Had you only financed what you spent....the $30,000 @ 4.5% equals
$1,350 paid in interest per year. That flawed technique results in you paying
$90 per year more in interest and it gets worse if the money market rates drop!
But like I wrote above:
Quote:
Perhaps if you borrowed more money you could make it up on volume! 
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03-18-2008, 06:53 PM
Depositing HELOC funds in Money Market Acct
