pm : Remi, I am not aware of any schedule of payments that can shave 2.5% off of an effective interest rate of 4%. If you can come up with some time line of deposits where your HELOC interest rate would in fact by effectively 2%, I would be interested to see what it is. If you can, please make up an excel spreadsheet with a starting balance of 50k, the proposed payment schedule, and the effective interest rate and post it online somewhere. This would be extremely valuable information. I am not aware of any payment scheme which will shave 2.5% off a 4.5% rate. I am not even aware of any payment scheme that would reduce the rate below the 4% you could get on a fixed rate with monthly payments. I'm interested to see what you can come up with. August 19, 2011 Remi @ 3:31 am : Scenario: (1) Outstanding first mortgage of $50,000 at 6% (2) Equity in the house of $150,000 (3) Get a HELOC of $50,000 at 4% (4) Pay off first mortgage with HELOC money (5) I am now left with a $50,000 HELOC at 4% As you said, if you can't get a HELOC at a lower interest than that of your first mortgage than this direct approach will not work. We agree on that. This is one flaw to expose because I've seen explanations on the Internet that assumed you could get a HELOC at a lower interest rate than