I have a current mortgage of $135,000 on my primary residence. This single family home is valued at $300,000. I want to buy a piece of vacant land for $145,000. I have $40,000 to put down on it, so would need a loan for $105,000. I've been told to go with a home equity loan or HELOC. I've only had experience with fixed rate mortages so a variable rate kind of scares me. Any suggestions? Thank you.
2007-01-12 04:41:39 · 9 answers · asked by Michael G 2 in Business & Finance ➔ Renting & Real Estate
Some details, my current mortgage is at 5.3% fixed so I don't really want to touch it. Also, because this is vacant land I've been told that the interest rate will be around 8% for a fix rate loan on a non-residence property. Hope this helps. :)
2007-01-12 04:59:44 · update #1
I agree with the Fifth Third Banker in this scenerio. Construction to Permant loans have totally decent rates right now, so if you are building on the property, then that is the way to go. If you are not going to be building a house on the property right away, then I would either:
1. Find a HELOC that has a fixed rate option in the contract. Most banks are doing this now, so you have plenty of choices. Depending on your credit score your rate will be around 8.25% and your minimum payment will most likely be interest only.
2. Take out a fixed second mortgage on your primary residence. The rates are around 7% - 8% right now on 2nd mortgages. So your blended yield is around 6.75 between the two mortgages. Very managable.
Good Luck,
Frank
2007-01-14 11:28:18 · answer #1 · answered by Corporate Banker 2 · 0⤊ 0⤋
I was facing same saga.
I weighed every option.
I sold my home first and then cashed out the land. That was what was cheapest, simplest, and it was what I wanted to own. I didn't plan on keeping the house anyway. I was just keeping it until I could get my land etc.
Any way you look at it, you are mortgaging your home for the land. So if anything goes wrong you have put your home at risk. Sure some people do all of this buying land, building home, then selling primary res. But they are not usually the types that are counting their pennies very carefully. In other words to them they don't really factor in the total cost of the plan they just know that's what they want to do and then do it. I like to shave every penny off every move I make to greater optimize my potential. So that's what I did.
Hope that helps. Good luck. Watch your money!
2007-01-12 07:21:46 · answer #2 · answered by Anonymous · 0⤊ 0⤋
Leave your first alone and get a Fixed second. They are at around 8%. The problem is that you are now paying a melded rate of around 6.75 and the second is not going to be a 30 year fixed. Figure out what the total payment is on both and then go out and find if you can beat it with a new fixed on your home.
This also depends on how long and what are your plans for the lot.
2007-01-12 05:55:38 · answer #3 · answered by RE Broker 1 · 1⤊ 0⤋
I'm assuming you will be selling your single family and building on the vacant land, which means you should get a one-time close construction loan. Fifth Third is really competitive in this area.
Don't go with a HELOC...rates are pretty high on them right now.
2007-01-12 05:53:44 · answer #4 · answered by KL 5 · 1⤊ 0⤋
Honestly, just go to your bank or mortgage broker and ask them what the rates would be in each scenario.
There are pros and cons either way-- If you finance the land seperately, then if you ever lost your job or were sick/injured, it would be easier to pay for your house and let the land go to the bank or sell the land for some cash out/break even.
If you finance it with your regular home its possible to get a slightly better rate-- and then you also own your vacant land outright, which is always nice. :-).
2007-01-12 05:35:59 · answer #5 · answered by Anonymous · 0⤊ 0⤋
I personally would use the HELOC if I was planning on building anytime soon. There are no points or closing costs and you pay interest for the first 10-15 years. If you plan on holding it for te long term you should get a mortgage on it.
2007-01-12 06:23:33 · answer #6 · answered by tianaramal 4 · 0⤊ 0⤋
the main prevalent thank you to try this on vacant land is to furnish a down charge of normally 10 % or greater and get the land proprietor to hold the non-public loan for a million or 2 years which will enable you to get shape financing and so on. talk to a Realtor approximately this he or she will help with what you're attempting to do.
2016-10-07 01:30:13 · answer #7 · answered by esannason 4 · 0⤊ 0⤋
You don't need to get a variable if you don't want to.
Get the equity line of credit if you need to, then go shopping for another fixed loan at an acceptable rate.
2007-01-12 04:44:58 · answer #8 · answered by MarauderX 4 · 0⤊ 0⤋
To be honest with you.... a HELOC became higher than a regular 30 yrs fixed.....
you can refinance your first mortgage and get the money you need to get the lot..... call me for further questions or send me an e-mail.... I am FREE for consultation
fnfssandoval@yahoo.com
2007-01-12 04:47:20 · answer #9 · answered by Sergio S 2 · 1⤊ 0⤋