Looking for opinions on the 2 alternatives I have now (background - my home equity line of credit HELOC 10-year draw period ends in November. I never used it; it was just a safety net, and I would like to continue having tha t safety net. Current HELOC rate is 3.25%)
- Straightforward way - Get new HELOC from same lender (they will not just extend the draw period). They offer 0 closing costs but only 5 year draw period at higher rate, probably 5%. Again, I would plan never to use it, j ust a safety net. (Or I could look for a HELOC from a different lender tha t might offer better terms.)
Drawbacks: hassle of a closing; risk of lender reducing the credit limit du ring the draw period (even though they never did so during my past 10 years )
- Maybe a bit odd, but - Use the present HELOC before it expires in Novemb er (e.g. take out 0,000 of the 00,000 HELOC limit) and put that money in the bank (actually cash value fund of my life insurance which pays 4% t ax-deferred) as my safety net, making regular payments on the HELOC debt ov er the next 20 year payment period.
Drawbacks: impact to my credit rating from having a $100,000 HELOC/2nd-mort gage debt, which might block me from getting a new HELOC if this option 2 t urns out to be a bad idea
Opinions? Thanks.