My husband and I own our home. We purchased it over 6 years ago. (It was a repossesion) Got a great deal. Even in the slow market we probably have $100,000 in equity. The draw back with the repossesion is it needs some TLC. We need new windows and siding. These items are big ticket items. Probably about 25,000 together. Our current interest rate on the mortgage is 6.25%. Should we get a second mortgage, a heloc or a line of credit to tap into this equity? We both work and have decent credit.
2007-06-06 08:42:24 · 7 answers · asked by Anonymous in Business & Finance ➔ Personal Finance
A HELOC would have a lower rate, and are only required to pay interest on them.
A HE Loan would give you a specific up front amount and a specific payment period.
I would go the loan route so you can be sure to be paying off the borrowed amount on a monthly basis. Get some estimates on how much the windows and siding would be and then get a loan for a little more. You will not get a loan anywhere near the 6.25 you are paying on the first, but spread out over 15 - 30 years it will be a small payment (about $220 a month for $30k over 30 years at 8%).
2007-06-06 08:54:22 · answer #1 · answered by Anonymous · 0⤊ 0⤋
Mortgage rates are not too much better right now compared to what you are paying. Second mortgages, HELOC, line of credit, etc. are the same thing. If rates were around 5%, I would say do a refi, but as of right now, I would say do the home equity line of credit. Considering you are using it for home improvements, you are able to deduct that interest on your taxes, and it effectively brings the rate you pay from 8.0-8.25% down to 6% or so. You could always pay your line of credit down and use it gain which is a much greater benefit than doing a loan. Plus, line of credit payments are ALWAYS lower than loan payments.
2007-06-06 08:56:31 · answer #2 · answered by ruca80 3 · 0⤊ 0⤋
My parents bought a house that needed similar work. Get as many estimates as you can from reputable builders. Once you have a fairly good idea of what you will need to borrow, check what interest rate your bank would charge versus you mortgage company. In some instances, the bank might be cheaper.
If you will be buying a lot of the supplies yourself, you might want to looking getting a Home Depot, or Lowe's card. They often offer a 0% interest rate for the first year in some cases.
Basically, go with the lowest interest rate.
2007-06-06 09:00:54 · answer #3 · answered by Anonymous · 0⤊ 0⤋
I'd go for the flat loan and not the line-of-credit. LOCs are going up and up with their interest to follow prime. You could find yourself paying way more that way than with a standard HELoan.
You also might consider doing your project in 2 stages. Do the windows and then perhaps do the siding in a few years. Or vice-versa, do whichever is most important and will help with energy bills and all.
2007-06-06 09:08:02 · answer #4 · answered by Anonymous · 0⤊ 0⤋
Get a home equity line of credit this will also let you know how much your home is worth in comparison to what you owe. With the line of credit you will basically write checks against what ou need thus preventing taking out more than you really need.
2007-06-06 08:52:35 · answer #5 · answered by Pengy 7 · 0⤊ 0⤋
I would think about completely refiancing, as that is pretty high interest. You could drop it a point, get your 25k and not increase your monthly payment at all.
2007-06-06 08:50:46 · answer #6 · answered by Anonymous · 3⤊ 0⤋
If you would like I could refer you to my supervisor. Just a response and you will be on your way.
2007-06-06 12:45:04 · answer #7 · answered by theamericanbombers 4 · 0⤊ 0⤋