this works. We were told that we were one of the few doing it right. August 18, 2011 Remi @ 3:24 am : Peter, Qwest, (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% It seems that both loans could be paid off in a similar manner. The interest on both is also deductable. Asking Peter: What would the bank say is so horrible about chosing (5)? Peter M Vaughan @ 5:32 am : Remi, The bank will not give you a fixed rate HELOC at a lower rate than a fixed rate first mortgage. That's what they will tell you. Search on bankrate. For a 50k loan with a lot of equity, you can get a 30 yr mortgage at 4% or a HELOC for 4.5%. Remi @ 9:02 am : Thank you Peter. So now the argument is that through judiciously taking out and putting back money (from paychecks etc.) in your HELOC that you could effectively lower the interest rate of 4.5% of your HELO to maybe 2%. I can see that by using your HELOC as a sort of checking account where you deposit your income that you may not have to pay the full 4.5%. Is there anything wrong with this reasoning? I appreciate your comments Peter. Peter M Vaughan @ 8:11