PDA

View Full Version : Refi Mtge vs Home Equity Loan Pro/Cons???


TwingleMum
04-12-2010, 04:33 PM
I have to do a lot of work on my house (100-150k) I have @ 400-500k equity. My current mtge is @ 6%. I'm starting to research loans. I don't know if it makes sense to refi or home equity. What should I be looking at to determine which loan? What loan did you get? Do you feel you did the right thing?? I don't like the idea of Adj Rates so I probably would be looking at fixed rates with long terms. I don't plan on leaving for at least 10 - 20 yrs if ever. Its a little scary to think about getting a loan for the amount of work I have to do in this economy. I should add my job is very stable and I have alot of senority. And its protected by a union.

seashoreCM
04-12-2010, 06:33 PM
Can you get a fixed rate home equity loan?

What are the closing costs for a small home equity loan leaving your original mortgage loan intact?

Versus refinancing and borrowing more money?

Versus getting a loan classified as a home equity loan but big enough so you pay off the old mortgage loan also?

You need to do some math homework to figure out what costs less in the long run.

TwingleMum
04-12-2010, 10:14 PM
The credit union is offering no closing cost HE loans. I was looking into possibly having my mortgage reassigned and then refi only the construction costs. Its a confusing jungle. I know I have a lot of research to do. I just wanted to see if anyone had any real life experience of strong pro or con I should be aware of.

PaulaSue
04-13-2010, 08:48 AM
Use a mortg calc to figure out both ways, IMO

For us the we wanted to refi to a lower year mort to start with. We got 2 % less (for some points). With the savings we got off of interest/less years to pay off we decided to take out extra money to do some work on our house. We will still will be saving money on interest compared to also taking another loan out for a shorter time with the current home eq rates.

GL!

Bren's Mom
04-13-2010, 12:09 PM
One important piece of info is missing...how much do you owe on your current mortgage (and also is that the ONLY mortgage)?

You don't have to post it, but you have to consider how that affects what you do.

If you own a home worth $800,000. And you have $500,000 in equity than you owe about $300,000. You need $150,000. You don't want to go over a loan to value ratio of 80%, because then you'll need to pay PMI and that wouldn't be smart at this stage. So you can't go over $640,000. Any loan of $150k would do that.

But, if you own a home worth $800,000 and you have a current mortgage of $100,000 left and you want $150,000...you're golden. In that case, I'd consider a home equity loan for the amount of your mortgage plus what you need to do work on the house ($250,000). Often you can get a HE loan for way less cost, sometimes no cost, and at a better interest rate. Check with local credit unions, they often have the best rates. Pay off your current 6% with the HE loan.

TwingleMum
04-13-2010, 02:47 PM
Thanks the $150K would not take me over 80%. I didn't know if there were diff tax ramifications of equity vs refi. I've only had a fixed rate mtge.

wscottsawka
04-13-2010, 03:09 PM
I spent 20 yrs in the mortgage industry and got out 2 yrs ago right before the big crash. The thing you need to watch out for in doing any type of HE loan versus a refi is HE loans are usually adjustable rates on unspecific terms. Open ended. Think of it this way, they are like giant credit cards and they collect intrest the same way as a credit card. With that being said, as a General statement, HE lines of credit are not very good loans, USUALLY. I say that because if I say they are never good, someone will jump up and start quoting the exception that they signed. That is why i say usually. You might want to think about what I used to have people do all the time. Take out a HELOC (Home Equity Line of Credit), do all the work you need to, then refinance the 2 into 1 fixed rate mortgage.Either way, be sure you know what you are signing. There are still alot of shady mortgage lenders out there (and there will always be). Do your research and be comfortable.

TwingleMum
04-13-2010, 05:50 PM
I spent 20 yrs in the mortgage industry and got out 2 yrs ago right before the big crash. The thing you need to watch out for in doing any type of HE loan versus a refi is HE loans are usually adjustable rates on unspecific terms. Open ended. Think of it this way, they are like giant credit cards and they collect intrest the same way as a credit card. With that being said, as a General statement, HE lines of credit are not very good loans, USUALLY. I say that because if I say they are never good, someone will jump up and start quoting the exception that they signed. That is why i say usually. You might want to think about what I used to have people do all the time. Take out a HELOC (Home Equity Line of Credit), do all the work you need to, then refinance the 2 into 1 fixed rate mortgage.Either way, be sure you know what you are signing. There are still alot of shady mortgage lenders out there (and there will always be). Do your research and be comfortable.

Thank you so much. I knew a fellow Diser would be able to give me sound advice. This is basically what I a non professional always thought. I've always been leary of getting in debt and the way this economy is I'm even more paranoid but I bought a fixer upper in a very good neighborhood that well ... needs to be fixed up. And I don't have enough saving to do all I need to do. I have always said I'd rather pay a little more to a bricks & morter bank or credit union than get "a good deal" and wind up in a very bad situation.