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by JumpCrisscross 1898 days ago
> Let me introduce you to the HELOC

Home equity loans are predominantly used by middle income households [0].

The rich can borrow against securities at the call money rate, currently 2% [1]. Much cheaper than borrowing against real estate [2]. The less rich swap it to a fixed rate for added security; the richer take the rate risk. (They likely have natural hedges.) The super rich seek to borrow at or close to the SOFR [3], typically having Treasuries or similar structured products for the purpose. (If they have a business with float, that could be even cheaper than SOFR.)

[0] http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.574...

[1] https://www.bankrate.com/rates/interest-rates/call-money.asp...

[2] https://www.bankrate.com/home-equity/heloc-rates/

[3] https://apps.newyorkfed.org/markets/autorates/SOFR

1 comments

point taken! I like to use the HELOC as it is something most people can do.