Home equity, Is it a good idea?

Question

I have some bills i would like to pay off but I just refinanced last November. Can I qualify how does it work? Does my morgage payment go up? Thanks

Answer 1

Using your home equity to pay off consumer debt is both good and bad.

Good: usually lower rates than credit cards, tax-deductible interest, lower payments.

Bad: you might run up those credit cards again, and end up in worse shape. You restrict your ability to sell the home if you spend your equity now. You can also take a 3 year car loan and stretch it over 15 years and double the interest paid.

So, take a step back and think hard: If you pay off your consumer debt, will you change your spending habits? Or will you immediately think "hey, I've got $10,000 to spend, let's go get that plasma TV I've always wanted!"?

That's unfortunately what too many people do, they just piss away the money and end up further and further in debt. But if it's done as part of a total financial overhaul where you take better control of your budget and spending habits, it can be a wise move.

If you just refi'd in November, do not refinance again. Your current mortgage payment wouldn't go up, but you'd have a new loan against your home instead, so your housing payments would rise. But your overall payments would likely be lower.

Answer 2

A home equity line of credit (HELOC) is a seperate loan from your mortgage. It is based on your credit score and tied into the current prime rate. You can do either a fixed or adjustable loan. You will only pay on whatever you are using in a HELOC. Thus, if you borrow $50,000.00 which seems to be a suggested amount to get a better interest, you will only need to pay each month on what you are using.

If you only need to pay $20,000.00 on all of you student loans and other credit cards, you will only pay interest on that amount. The interest is also deductible when you do your tax return, verses the interest you pay on your credit cards for instance.

Some lenders will allow you to pay for any points or initial costs out of the total $50,000.00 as well.

Go to www.bankrate.com to read more about it and to check on todays best lenders in your area. It will give you a graph of the current interest rates and who is offering them.

In order to qualify for the best rate, you will need a good FICO score which is your credit rating. You are entitled to 1 free credit report per year and I suggest you take advantage of that. Bankrate.com can tell you how to get that as well. The best score you can have is 850. Anything in the 700-850 range is very good.

It is a good idea to do it. Interest rates are not that great these days so that is the down side, but it is still overall less than what you will pay with other credit lines.

Good luck to you!

Answer 3

You can definitely pull out a Home Equity Line of Credit(HELOC). There are some good and some bad that come with the decision to pull out a HELOC. The good thing is that you will be able to pay off your debt and it will definitely be at a lower interest rate than your high interest credit cards. The bad thing is that HELOCS are adjustable. However there are fixed seconds that do NOT adjust and you would get all the money at once instead of having the money at your fingertips. It all depends on what is best for you and your situation.

Answer 4

A home equity loan will be a totally separate bill than your mortgage payment, so your actual mortgage payment will not go up, you will just have an extra bill in the mail.. Most mortgage companies require you to have at least 20% equity in your home, and good credit before they consider giving you the loan. The refinance may hurt you, and it may not, the only way to tell would be to call your mortgage company.

Answer 5

its a total bad idea.

1. All you are doing is moving the debt. You need to buckle down and pay em.

2. You are putting your house on the line. If something happens and you cant pay that back. Goodbye house.

3. Some, if not all home equity loans can be called due at anytime. If the bank thinks maybe you are getting to far in debt they can say i want my money.

dont do it

Answer 6

I have a home equity loan and I love it . It allows me to borrow up to 75% of the sale price of my home, and all I have to pay is the interest,(monthly) which in my case is less than a mtge.payment. I am a senior citizen on a very limited income, and this seems to be the best of the best for me. Give this a lot of thought before you do anything, look at all your options.

Answer 7

If you have solid credit you can apply for a home equity LINE of CREDIT (HELOC), which will have a different payment each cycle depending on how much you have taken out of it. It's a revolving line.

Better than paying high interest credit card rates.

Answer 8

Check out this site for tips and ideas:

http://loanslowcost.com/