- I'm guessing that as you're looking to buy a home in a low inventory market you're looking for extra cash for a down payment to make your offer look as good as possible?
- If soon on the market for a mortgage you're right that you don't want a new account within 6 months of app'ing for a mortgage
- But a HELOC would be a new account, whereas a BT on an existing CC would not be a new account.
- "HELOC" stands for Home Equity line of credit, I've never seen a HELOC offered on a commercial/rental property. You might be able to get a LOC or 2nd mortgage on a rental property but the rate would likely be higher than 6%, and you will have fees of $600 & higher for appraisal & closing costs. I did a HELOC on my primary residence in 2017, the rate is Prime +0% for 80% LTV, but the appraisal & fees were around $600. But it's good for 15 years and has interest only payments.
So I think a BT is your better choice.
Assuming $5000 debt and $500/month to pay it off, you have your two options:
HELOC @ 6%, you'd pay it off in 11 months, with the final payment being 141.67. Total interest paid = $142.40.
BT w/3% fee, for $5000 that's $150. So a bit more than the HELOC interest. But it's only $7.60 higher. So, basically a wash.
You could go either/or, but I'd probably go with the BT unless it maxes out your utilization. Unsecured vs. secured debt. On the other hand, if something happens and you don't have the $500 to pay, and have to pay less, you could wind up paying interest on the BT, while the HELOC will just keep going at 6% until you pay it off.
For those who are wondering why the 6% interest on the HELOC is cheaper than the 3% BT fee, it's because you're paying the full 3% up front, while the 6% interest is annualized and calculated on the balance monthly, so you're paying only 0.5% each month on the remaining balance, which is going down as you pay down the balance.
I pretend to work, they pretend to pay me. I have pretend credit cards with pretend limits, so I can pretend to buy pretend things and pretend to pay the bills.
...for less than a ten dollar difference, I'd go the BT route.
DivorcedAndBroke, I agree with your math, but there is one more thing to consider. The mininimum payment on a balance transfer is usually between 1% and 2%. So rather than paying $500 each month, one can just pay $100 and deposit the remaining $400 into a savings account. After 11 months (or whenever the promotional period of the balance transfer ends) one uses funds from the savings account to payoff the balance transfer. Assuming the savings account pays 2% interest, one will earn about $37. So the BT comes out ahead of the Heloc.