Am i off the mark here with thinking that i can take out a home equity loan to pay off my 20% mortgage loan? I didn't have the 20% down payment when i bought my place, so i took out a 20% loan @ 9.75% to cover that and avoid the PMI. Can i take out a home equity loan to pay this off, while paying back the home equity loan at a much lowwer rate? Or am i better off refinancing after paying my mortgage for at least a year?
2006-07-18 13:23:24 · 6 answers · asked by Michelle's boyfriend 2 in Business & Finance ➔ Renting & Real Estate
Unless you had some major increases in your home equity there is no lender that will touch you. Better bet would be a credit card transfer with a low interest fixed rate until balance payoff and then put that card in a drawer and forget you have it.
Also home equity loans can cost you your home because, read the fine print, lenders can "call" the loan anytime they want. If you can't pay right away you get to move out.
2006-07-18 13:28:44 · answer #1 · answered by Steve D 4 · 1⤊ 0⤋
Your other issue is finding a lender that will not require you to be seasoned. That is own the home for 6 months to a year. I personally would wait to refinance. First off, I doubt you are going to get a home equity loan for under 7% so after all of the fees and expense are you really saving that much over a 1 year period. Secondly, you will injure your credit rating if you start applying for additional monies and make it more difficult to get a "better" rate in the end. Home equity loans are considered lines of credit, not unlike a credit card, as opposed to a fixed mortgage. You lose points on your credit file. Again, I don't think a 2% change in interest is going to matter in the long run.
You also don't indicate how long do you plan to stay in this property. The average lenght is 7 years. If you will be staying for less, there are several ARMS out there that make sense. You can lower the P & I or even just pay interest for the term of the loan. If you are doing interest only, then you want to take the money you save and invest in a retirement account or some other investment vehicle.
Pick up a copy of this month's "Success at Home" magazine. I work for the featured company which is a leader in the real estate and mortgage industries. There is an excellent article on the myths of money and how to "harness the power of your mortgage."
2006-07-18 14:39:42 · answer #2 · answered by Sam B 4 · 0⤊ 0⤋
You did not indicate when you purchased your home. Most people when they get a 1st and 2nd mortgage for the same reason as you so they would not have to bring a down payment to the table as well as pay PMI.
Most individuals wait until they have enough equity in their property to refinance.
Getting an equity loan would only cost you more money because of the points, closing cost, there could be a pre-payment penalty, so if you have had the property less than 2 years this might be an expensive transaction for you.
If you purchased your home less than a year ago, you probability don't have enough equity to do what you want. Wait for at least 2 years unless something happen significantly during the year that cause your equity to sky rocket.
I hope this has been of some use to you, good luck.
"FIGHT ON"
2006-07-18 14:42:16 · answer #3 · answered by Skip 6 · 0⤊ 0⤋
the prime interest rate for a home equity line is 8.25% (up from 4% just 3 years ago)... And most home equity lines are prime + 1 (or 9.25%) so chances are you aren't going to find a better rate anywhere...
it is one of the most volatile loans you can get because of the rapidly rising rate, and the damaging effect it can have on your credit..
your best bet is waiting until the year is up, and and refinanceing into 1 loan... even if the rate is a little higher, the combined interest is sure to be lower..(saving you more in the long run)
if you would like any more assistance, or simply have a question, you can feel free to give me a call, or email me direct.. My name is Jason Fry, i work with Providential Bancorp, a nationwide lender.. Call me at 312-264-6448, or email me at jasonf@providential.com
good luck!
2006-07-19 03:58:23 · answer #4 · answered by MortgageGuy 3 · 0⤊ 0⤋
You would be better off refinancing the full amount. I work for a nation wide direct wholesale lender. I can promise you would get the best rate best program, based upon your situation. If you would like more information you can contact me at (818)-921-8807. My name is Jason Wyatt. I look forward to helping you.
2006-07-19 19:58:28 · answer #5 · answered by wyattloans 1 · 0⤊ 0⤋
if you did 100% financing , you probably have no equity to get a line of credit against. in texas at least, you can only borrow a total of 80% of the homes value total including 1st and 2nd liens
2006-07-18 13:29:37 · answer #6 · answered by daniel r 4 · 0⤊ 0⤋