It appears that you have done a detailed analysis and comparison of the two options you mentioned, and it seems that the second option of borrowing against your HELOC to pay off a portion of your mortgage and then paying $1200 to the HELOC along with your normal mortgage payment results in a shorter payoff time and a savings in combined interest.
However, in order to provide a more accurate answer, I would need more information about your overall financial situation. This would include things like your current cash flow, your other debts, your emergency fund, and your retirement savings.
One thing to consider is that a HELOC is a line of credit, which means that you can borrow against it multiple times. So, if you have any unexpected expenses, you might be tempted to borrow more from the HELOC and increase your debt. Additionally, if you don't make your payments on time, the interest rate on the HELOC could adjust to a higher rate.
Another thing to consider is that the extra $1200 payments that you plan on making each month to either the mortgage or the HELOC will have an opportunity cost. This means that the money you use for extra payments could have been invested elsewhere and could be earning a return.
It's also important to consider the tax implications of the two options. The interest on a mortgage is generally tax-deductible, while the interest on a HELOC is not.
Paying extra to your mortgage each month can be a good idea for some people, depending on their overall financial situation. Some of the benefits of paying extra on your mortgage include:
- Paying off your mortgage sooner: By making extra payments, you can pay off your mortgage faster, which can save you thousands of dollars in interest over the life of the loan.
- Building equity faster: Each extra payment you make goes directly toward paying down the principal of your mortgage, which means you build equity in your home faster.
- Reducing your overall debt: By paying off your mortgage faster, you can free up money that you can use to pay off other debt or invest in other areas of your financial life.
However, it's important to consider the opportunity cost of making extra payments. The money you use for extra payments could have been invested elsewhere and could be earning a return. Before deciding to make extra payments, it is recommended to have a good emergency fund for unexpected expenses, pay off high-interest credit card debt and make sure you are saving enough for your retirement.
It's also important to consider the tax implications of the extra payments. The interest on a mortgage is generally tax-deductible, but it's worth checking with a professional tax advisor to see how this applies to your specific situation.
All told, it seems that the option of borrowing against your HELOC to pay off a portion of your mortgage and then paying $1200 to the HELOC along with your normal mortgage payment results in a shorter payoff time and a savings in combined interest. However, it is important to consider the other factors in your overall financial situation before making a decision. And it is recommended that you consult a professional tax advisor to see the tax implications of this move.