A couple owes $220K at 2.75% — and a TikToker wants them to swap it for an 8% variable HELOC

“What’s the purpose of it — the grand purpose in his mind?” Warshaw asked. “‘We need to get the first-lien HELOC because I need to get a boat,’ or ‘Because we’re funding college.’ Like, what’s the why?”

Brooke said that because they are in their 50s, the idea was to pay off their mortgage before they’re retired. They still owe about $220,000 on their mortgage, and the TikToker that her husband follows claims that the first-lien HELOC can allow people to pay off their mortgage in three to six years.

“The why is [to] pay [the home] off in three to six years,” Brooke said. “But we don’t have, like, this huge income, like, minus our debts that we have to even throw at this HELOC. Because that’s what it seems like to me that you need. You need this huge income.”

Delony said that there’s no “secret atomic way to make you owe less than $200,000 on your mortgage.” While “there might be a way that you can reduce your interest rate,” he explained, “There’s not a way to contract time or to contract money from what you owe.”

Brooke’s mortgage currently has a 2.75% interest rate, and she said she was seeing daily rates for HELOCs at 8%.

When Warshaw heard that those HELOC rates were also variable, she said, “That’s scary.”

“I’m trying to say this in a non-incredulous way, but truly I can see no good in this,” she added.

Delony agreed that the high variable interest rate on the first-lien HELOC versus the 2.75% rate Brooke already had was a no-brainer. Plus, with the HELOC, there is the temptation to spend.

“You’d have to be superhuman to never spend this line of credit,” Delony said. “There’s no way you’re going to get a better interest rate. It’s a credit card at a variable rate that’s higher than your mortgage. Like, there’s no possible win here.”

The hosts advised Brooke that she should write out a plan for how much they’d have to pay every month to pay down their mortgage in 72 months, and then ask her husband to run the numbers on the first-lien HELOC, and how it would save them money — factoring in that interest rates could go up.

Warshaw noted again that the HELOC also comes with a temptation to spend.

Delony agreed, “It’s just total madness.”

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This article originally appeared on Moneywise.com under the title: A couple owes $220K at 2.75% — and a TikToker wants them to swap it for an 8% variable HELOC

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