Is it better to leave money in the bank earning 4.5% interest or take it out and pay off the home equity loan @7%?

Is it better to leave money in the bank earning 4.5% interest or take it out and pay off the home equity loan @7% Asked by watermelon 49 months ago Similar questions: leave money bank earning 5% interest pay home equity loan @7% Business > Financial Planning.

Similar questions: leave money bank earning 5% interest pay home equity loan @7%.

The raw numbers would say to get the most from your money but you have to remember that the home equity loan is probably tax deductable and the interest from the bank is probably taxable so the margin is smaller than it seems at first. Also, there is some value to having a little cash around for emergencies or opportunities. If you have emergency funds in other areas then this may not be so important but if you don't, keep six months of expenses liquid.

Also don't disregard anything else you are paying more interest on like credit cards or revolving accounts or even a car payment. You may also want to consider that over the long haul, that money could earn 9-11% in a solid stock or mutual fund investment. Good problem to have....

That depends on whether you might need that money in the future. Short term logic says that you are paying more in interest on the loan, than you are earning in the bank. But you should keep 6 months to a year of expenses in a very liquid state, such as a savings account.

This is to cover emergencies or unexpected loss of employment. Once you have this safety net in the bank, you can use any additional funds you acquire to pay off the loan. Using your emergency fund to pay off the loan would cause a delay in paying for emergencies by having to apply for another loan.

I suggest leaving a minimum amount in the bank, even though it is earning less interest, and using the rest to pay down the higher interest loan. As another option, once you pay off your home equity loan, you might investigate a home equity line of credit (HELOC), if your state allows these. A HELOC allows you borrow money when you need it without forms or approval, and you don't have to pay it back on any schedule.

You only have to pay the interest on the amount you borrowed every month. Different states have different rules, but this has taken the place of my emergency fund. I don't keep money in a bank savings account, because it can make much more money in the stock market, or paying off the mortgage.

If an emergency comes up, I draw funds from the HELOC, and then pay that money back instead of paying down the mortgage or investing in the stock market. I hope this helps.

I'm anti-debt Assuming this is not emergency-fund money (which is = to 1-3 months income) AND assuming that there is no fee to withdraw the funds, then I would payoff the home equity. I think paying off debt is generally a better idea, unless its at an insanely low interest rate. Good luck!.

Pay it off You aren't earning more than 7%, so you will end up paying more in the long run. If you have enough to pay it off and still have a good emergency fund, then I would say to pay it off. The other option is to invest the money in an account that will give you greater than 7% return.

Since I don't know the amount you are talking about, it is difficult to say if you can do this with some type of bank account or if you would have to scale up to a longer term fund.

I would leave the money in the bank and earn interest on it. The HEL should be giving you interest deductions for your taxes. It pretty much works out as a wash, but if you take out your savings and pay off the HEL, then you don't have the money available in case of an emergency..

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Getting a new home loan. Excellent credit and preaproved. Do you think interest rates will come down in the next 5 weeks.

I owe 25Kmostly in credit cards. Should I take out a 9.5% home equity loan or get 0% interest cred cards til paid off?

Is is better to invest in a five year interest only home loan at 5.5% and invest what's saved in a 401k earning 8%.

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