Refinance or home equity loan?

Question

I have about $20,000 worth of equity in my rental property and I would like to pay off approx $15,000 of lingering dept so I can just have no outgoing bills and just pay the house payment that the tennants are paying already and no bills. I am confused at what would be the best way for me to go either refinance or home equity loan or a home equity line of credit?
My credit score is about 650. thank you for the help

Answer 1

Don't take unsecured debt that you have now and secure it with your house. Understand that taking out a home equity loan or refinancing is not "paying off" your $15K worth of debt, it is TRANSFERRING it. With the housing market being how it is at the moment, don't put that debt on your house. You may find yourself upside down in the mortgage in a year if you do. Just keep working on the debt and get it paid off.

Answer 2

I think you should shop around and see what's available and what the interest rates are and the closing costs. I guess if you would refianance, you would "cash out" the $20,000 and refiance the rest--inerest rate, I don't know. Closing costs could be financed, but that would eat up your equity. You will only have one mortgage payment on this property.

I don't know how home equity lines are handled when you rent your home out. $20,000 is really not very much money when you get a home equity line of credit or a home equity loan, so your interest rate would be a bit higher. What you would do would be to draw on that $20,000 (or like the other poster said, maybe less) by writing checks or using a credit/debit card and you make the payment only on the amount you use, not the full $20,000. You'd have mortgage payments, which would both be tax deductible. Sometimes the lender will write checks from your home equity line to pay off those other debts at the time of closing and what ever is left would be yours to draw on. I have a home equity line that is over $100,000 and my rate is prime minus 1 percent, which is now 7.25 percent, which can go up or down each month, depending on the prime rate. You would probably pay between 8 and 9 percent. Check with your lender and ask them if you can get a home equity line on a rental property, what is the ratio of loan to value (how much money can you get), ask them if they have any deals where they pay the closing costs. The lender will generally use your tax bill to determine your equity--the mortgage amount owed versus the market value of your property on a home equity line rather than paying for a full blown appraisal. Check with your mortgage lender first, but you can get a home equity line from another lender even though the main mortgage is held by somebody else.

Answer 3

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 4

This is the big problem and the major 1 is the fact that it is investment property and you will be maxed with most lenders at 85% at best so you may not have a good option on this.

Answer 5

just pay off as much money as you can--it will be easier for you to pay bills after