(no subject)

[which_chick]

My local bank, hereafter referred to as SuckMeHannah, is offering a HELOC (home equity line of credit, for the finance newbies) with no fees and a four month introductory period where the interest rate is fixed at 2.99%. After the four month period, the interest rate reverts to prime (lots) and I'd pay through the nose at that point. Four months of 2.99%, though, is a nice deal. The HELOC starts at 10K and goes upwards -- you can't get one for less than that, which I know because I asked the teller about it today.



I own my home free and clear and comps sell for about 45 or 50K. An empty lot with only a septic tank on it in my area just sold for 20K. Whatever my house is worth, and I think it's worth more than 10K, I have all the equity in it, so I can probably borrow more than 10K via a HELOC. Now, one of my online banks pays 4.25% as a matter of course and can be expected to do so for the four month duration of the cheapie HELOC rate. (If they don't, the risk is very low -- I transfer the money back to my SuckMeHannah account and pay off the HELOC forthwith.)

The current situation strongly suggests that I can, for four months, borrow money at 2.99% and get interest on that same money of at least 4.25%, all via FDIC-insured institutions who are extremely unlikely to break my legs. This gives me essentially free interest on money that I do not actually have to front myself, to the tune of 1.24%. I gotta say, if I could find a way to do this all the time it'd be my dream job. :) Man, I am such a dork.

Is it worth my time to get a HELOC from SuckMeHannah at 2.99% so that I can earn interest on what will be essentially free money? Let's go to the videotape! (This is the sort of problem that we never did in math class. It is the sort of problem I would have found very entertaining, but we never did this stuff.)

For each 10K that the bank is dumb enough to loan me on this HELOC deal, I will make about forty bucks on the four month deal. I'd also get the experience of applying for a HELOC. It'd be fun. It'd be educational. I think probably I could do with an amusing distraction these days and while it is a sad commentary on the state of my life that this qualifies as amusing, I'll take what I can get.

Comments

Transaction costs will eat you up

[ardvaark99999.livejournal.com]

They will probably want an appraisal, possibly recording fees, document prep fees, application fees, blah, blah, blah. Inquire as to the transaction costs associated with said project before taking the plunge.

Re: Transaction costs will eat you up

[which-chick.livejournal.com]

Yes.

You and my mother and about six other people have taken the time to mention this.