According to Warren Buffett legendary investor of all time, when the tide goes out you will find out who's naked. Even though it's still the same payment, because dollars are worth less, you are paying it back with cheaper money. Either way, you can use this mortgage payoff calculator to estimate the monthly payment required to be free and clear for any date you choose.
B has already qualified (while he was earning the income needed to qualify), borrowed, and locked in his rate, and he now controls the 500K cash. In the process, they will also save $35,000 in interest payments. Over the last few years having enough cash in investment accounts has allowed me to take on more risk at work which has payed of handsomely and allowed even more taxable account contributions.
It's comforting to know that sooner or later, our mortgages will be paid off and we'll be able to drastically lower our cost of living or generate an increase in rental cash flow. With a traditional 30-year mortgage, in the early years of the loan most of the monthly payment goes toward paying the bank interest.
I jumped at this opportunity and used the fixed rate advance + cash to pay of the variable HELOC balance. This same $20,000 paid off by a HELOC at 9% interest will only require a $150 payment to interest. Indeed, if you are already in huge debt, you probably should stop using them and begin a payback strategy immediately.
Once you decide which loan payoff strategies make sense for your financial situation, put a plan in place that includes regular check-ins to keep you on track. My goal is to make some strategic investments mortgagepayoffheloc to boost my income and equity position and even with that I still show my primary residence being paid off in 9-10 years.
Imagine it is 5 years later, and rates for a similar product have doubled to 7%. For B, there is now a powerful arbitrage opportunity, he is now GUARANTEED to generate enough return to pay the interest plus take profit with near-zero-risk, since secure yields in that environment (Treasuries etc) will move above his cost of capital (still 3.5%, or sub 3% after taxes).