If I make extra payments towards the principal of my mortgage, am I getting as many benefits as I think I am?
The shock of looking at your first amortization schedule is quite amazing. I've decided to pay down my mortgage. Retirement is ~5 years out. I look at the extra payment as a double positive. Not only do you drop the balance, but the normal payment has a better ratio towards principal as well. I have a difficult time looking at the interest rate all by itself when comparing a HELOC that is not on an amortization schedule, nor like simple interest. Or in other words, if all else is equal and you have a mortgage and a HELOC at the same interest rate both fixed. I think you kill it with paying down the mortgage.
Answers | 2
Are you carrying non-tax deductible consumer debt elsewhere, at higher interest rates? Are your liquid savings adequate to cover 3-6 months of living expenses? Are you fully funding your retirement savings, at least enough to receive all your employer's 401(k) match?
Your HELOC almost certainly has a floating interest rate tied to the prime rate, which is going up. Just because the rates on your first and HELOC match today is no guarantee they'll continue to do so.
Lastly, remember that home equity (achieved by paying down your first mortgage early) is non-liquid. You can't easily access it, unlike available credit on a HELOC.