To Use HELOC Or Credit Card?
I have two methods to raise the down payment for my next property.
First, I have a credit card balance transfer at 3.99% till the balance is paid off with an initial $300 transfer fee (which I am assuming are closing costs in this scenario).
Second, I have a HELOC at 10.25% interest rate. This HELOC is in place and has no additional costs on the money. Obviously, this interest is deductible, so assuming that I am in thge 33% tax bracket, the effective interest rate on the HELOC is actually 6.86% (Right????).
Anyways, I am leaning towards the credit card and just making the minimum payments till the amount is paid off rather than using the HELOC for this downpayment. I realize that the credit card will show up as unsecured credit on my credit report and thus might have a larger negative impact than the HELOC.
Please help, I am confused about the potential pros and cons of each option.
Thanks in advance.
JS.
Hi JB.
Can you tell us the amount of money you are talking about?
Also, what is the plan for the property? Hold, flip, sell in a year, etc?
Brian
You indicated that the credit card allowed for a balance transfer. Sometimes the credit card companies make you pay off an existing debt, instead of writing a check. Make sure that the 3.99% special rate that you are talking about is for a convenience check, not just a balance transfer.
All things being equal, the lowest rate might be better. You will probably deduct any interest that you are charged to the investment property, so both (the home equity line or the credit card) would be deductible..
Just my 2 cents..
Derek
Webuy,
How does one deduct credit card interest that is used for a home purchase? I thought that was not allowed by existing tax laws and only mortgage loans could be deducted.
Please advise.
Thanks,
JS.