Sell, Refinance, or Home Equity Loan?

Question

I am seem to be swiming in debt at this time in my life...I would like to secure some money to help me pay off some bills.. I have equity in my house. Is it best to refinance this high interest loan, sell the home and use the profits to pay my bills, or take out a home equity loan? My first instinct is to stay in the house for a few more years beacuse this area is increasing in value.. How safe are home equity loans? Is refinancing wise with poor credit?

Answer 1

Hello -

I'd say that your instincts are correct, and you should hold onto your home. Congratulations on making such a great choice of buying in an area that continues to appreciate.

May I ask where your located? I always am interested in areas that continue to appreciate.

Home Equity Lines of Credit are the most expensive type of loans you could get and I'd advise strongly not to get one. I understand how tempting they can be with those checks arriving in the mail. Think of this though, if they send you FREE checks in the mail, don't you think you would also qualify for a loan that will allow you to pay off those high rate credit cards?

If you are considering refinancing your home, you likely have many questions. If you are confused, you’re not alone. It can be very confusing. There is a FREE website that will answer all of your questions, and provide the following information:

- How to know whether or not you should refinance
- How to know if you should finance your “up-front” costs
- Why some people choose to refinance to a higher loan rate!
- A FREE Calculator to help you decide

Here is the link -

http://www.freemortgageinformationsoutherncalifornia.com/refi_mortgage.aspx

Then you mention that you have poor credit, how poor is it? Remember that you could refinance now to payoff your intial debt and then if you pay your mortgage on-time for 10 months, that your FICO score should improve from 50-100 points. This would allow you to then refinance again into an even lower monthly payment.

When you apply for a mortgage, the mortgage lender will review your income, liabilities, and most importantly, your credit report to determine if you qualify. Even small credit report inaccuracies can hinder your ability to get the home loan you need and deserve. And credit report inaccuracies are more common than you might imagine.

There is a FREE Report which will teach you:

• What lenders look for on a credit report
• How you can improve your credit score
• How to know if you have inaccurate information on your credit report
• How to obtain a FREE Credit Report

The website link is - http://www.freemortgageinformationsoutherncalifornia.com/credit_secrets.aspx

It is always best to consolidate and payoff bills that have high interest rates. By adjusting ratios on your credit cards and possibly disputing inaccurate information on your credit report, your credit can increase significantly.

Follow your instincts and please let me know if you might have any further questions.

Best Regards,
Darren Meade

Answer 2

You need to live somewhere, so staying in the house is probably the best bet. As far as refinancing or a Home Equity Loan, that depends on a few other factors.

If your current mortgage is at a higher rate, it may be wise to refinance and take some cash out. If your current mortgage is at a really low rate, just take out a Home Equity Loan (HEL).

As far as the safety of a HEL, that depends on what you mean. You are taking out the equity in your home, so if you don't pay this bill, your home is on the line. If you are concerned about the rates, a HEL will have a fixed rate, so there is no worry of it increasing. A Home Equity Line Of Credit (HELOC) on the other hand will adjust any time the Fed's change the rates. I think they have been raise a lot over the last few years, so the rising should slow down or stop at this point.

Of course if your credit is too bad to qualify for any loan, you should probably sell, take the money and pay off ALL your debt, rent for 6-12 months, allow your credit to rise and then buy again at better rates.

Peace,
Greg S.

Answer 3

Dear Bryan:

How much equity do you have? What is your current interest rate? Is your current mortgage fixed, adjustable...? Have you checked your credit or are you assuming that you have a poor credit score?

Having asked all those questions...They'll need to be answered for you to determine your best options.

On that note:
1. If your current interest is lower, you'll do better to do a home equity loan. You can get a fixed or an adjustable based on a margin + prime. The lower your credit score, the higher your margin.
2. Home equity lines of credit (HELOC) are sort of a revolving loan that's secured by a lien against your property. You will usually be charged interest only for a number of years ( the draw period) and then have a fixed payment calibrated for the rest of your loan term so that your loan will be paid off at the end of the term.
3. The closing fees for HELOC's can be waived if you keep the loan for ceratin amount of time. Not every lender does this so check. If you do have to pay them, they are usually a fraction of what it would cost to refinance.
4. The interest may be tax deductible.
5. If used wisely, HELOC's can be a good loan, but, it is still a mortgage. If you default on your payments your home may be foreclosed on.
6. If you're payment history is starting to suffer because you can't afford to make your payments, then refinancing may be a prudent way for you to start getting your life back in order.
7. Selling your home and downsizing might also be a prudent move, however, can you wait until your home is sold? What's the average time for a home sale in your location?

If you'd like more detailed information, please contact me at [e-mail].

Best of luck!

Anne

Answer 4

Refinances and home equity loans are normally going to pull money out to pay for the bank/broker's costs. These costs can be as high as 6%, and maybe even more in certain parts of the country.
It is true that home sales have taken a beating this year, even so, everyone and their grandmother has a house on the market. An d everyone thinks their home is worth more than the actual market value.
If you decide to put your home on the market, do two items:

1. Price it appropriately - if your house is the same house as every other house in the area, you are not going to get a better sale price for the cross breeze coming through the kitchen that other homes do not get.

2. Make the property attractive - Paint neutral, clean garage and basement, take care of odors, clean and manicure lawn and landscaping.

The best bet at this time, though, is to find a part-time gig, take care of the bills, and hold onto your home until the market regains strength.

Answer 5

I think the most flexible option will be to do a home equity loan. This will give you a lower interest rate than the credit card, and interest is tax deductable. It still allows you to live in the home, and sell it when the time is right for you. Refinanceing will likely result in the lowest rate, but will come with more upfront costs. It also will likely be at a higher rate than what the current home loan is at. If you do refinance watch out that there is not prepayment penalty (if you decide to sell and move soon). If you are looking to leave area, ask yourself if you will want to have either property. Selling is the most drastic since it means you will be forced to rent until you move. If you decide to not move than you will either try to occupy the first house instead of renting, or buy a new one. Each of which comes with many transactional costs. To sum up: Heloc: Low interest rate Tax deductable Flexible if you decide to move or not Refinance: Lowest interest rate Less flexable, often higher costs in obtaining Potentially will be at higher interest rate than current home loan. Less flexible moving later, if prepayment there is condition Selling: High transaction costs More costs if you change your mind if you decide to stay in area. Will have to move (the pain of this depends on how much junk you have accumulated or if you have kids) May reduce living expense Gives you a better allocation of your equity (no longer home rich cash poor). I would pick the Heloc, but you are the best one to balance the pros and cons of each option.

Answer 6

There are some compensating factors that aren't known. When you sat bad credit how bad is bad? Unfortunately if its to bad you may not qualify for a Home Equity Line of Credit (HELOC). I recommend not selling as many markets have become soft and homes are on the market for 60-90 days. I recommend refinancing and paying off as much debt as you can and then your score will go up over a 12 to 18 month time frame. Then refinancing again into a much better rate and lowering your payments or even selling at that time. I hope this helps you and good luck but if you need help or have any additional questions please feel free to contact me www.dantadgerson.com.

Answer 7

I have been taught by the best that score generates monthly rate. So poor credit will give you a high monthly rate. However there are other options. An option Arm loan is one great one. It gives you a 1 to 2 .5 % loan for 3 to 5 years then it goes up. The trick is to just refinance before it does. This refinance can also allow you to debt consolidate.
~Love McNill
Freedom Mortgage

Answer 8

Get a home equity loan. If you refinance with poor credit the interest rates will be very high. Never sell real estate to pay bills especially when your house is appreciating.

Answer 9

Stay in the home. Home sales are down all across the country.

Just be sure you can afford the payments on the home equity loan plus your mortgage.

Answer 10

Bryan,

There are a couple of good answers, come over and chat online with me to get an immediate answer if you still don't have a good one, make sure to follow the link completly, I have normal business hrs in AZ.

Antal
Surefast Mortgage

Follow this complete link:
http://gabbly.com/http://www.surefastmortgage.com/...