Home Equity to Finance?

[Moniqu17]

First of all, I'm not looking to spark a debate but I am hoping for advice on trying to finance a resale and how it fits into the overall timeline.

Currently, we just signed our contract with Fidelity and I assume it will go to ROFR within a weeks time. We'd like to finance using a home equity loan since our bank has a 5% fixed option. I know people don't like the option to finance but we are financially sound and for personal reasons want to finance for 2 years. Has anyone used a home equity loan before? We are setting up an appt with the bank but it's a few days out. Just curious because if Disney exercises ROFR (which they very well could) then I don't need the loan, but is there enough time between passing ROFR and needing to send the final payment using home equity? Looking at recent timelines, it looks like it takes about 2 or more weeks (using Fidelity) between passing ROFR and sending payment.

Thanks!

 

[nalajms]

Personally, I don't see anything wrong with using a home equity loan to purchase DVC. We use it for our last car purchase... and I only expect to keep the car for about 10, maybe 15 years!

We'd like to finance using a home equity loan since our bank has a 5% fixed option.

You should look into a local credit union. They typically have much lower rates and you can get a fixed option for anywhere from 12 months to 60.

Just curious because if Disney exercises ROFR (which they very well could) then I don't need the loan, but is there enough time between passing ROFR and needing to send the final payment using home equity?

No, you may not have enough time. It depends how quickly the bank moves. You can start the app process during ROFR and finish after passing. From our application to actual money available in our account was 12 business days. If you know you will be buying a DVC this year, I'd just get the loan now. The money would sit in your bank until you actually purchased, and you'd start making monthly payments. We were able to pay cash for the car from savings, then get the loan.

Also, if you think you'll pay if off in 2 years, consider a no interest credit card. There are a few offering balance transfers for a 3% fee and no interest for 18months. At 5% for the home equity loan and a small tax write off for interest, the 3% balance transfer fee is still less.

 

[Airb330]

Also, if you think you'll pay if off in 2 years, consider a no interest credit card. There are a few offering balance transfers for a 3% fee and no interest for 18months. At 5% for the home equity loan and a small tax write off for interest, the 3% balance transfer fee is still less.

Slate has 15 months 0% with no transfer fees. That could be cheaper than other cards with higher transfer fees.

 

[montrealdisneylovers]

Not sure how it works in the US but here in Canada we can get a revolving home equity line of credit. We set this up years ago and every now and again use the line of credit for a short period of time then repay it. This way, the money is there if and when you need it. If you do not use it, you are not paying interest. Interest is only charged when you write a cheque on it. One of the most flexible credit arrangements IMHO!

 

[keaster]

Not sure how it works in the US but here in Canada we can get a revolving home equity line of credit. We set this up years ago and every now and again use the line of credit for a short period of time then repay it. This way, the money is there if and when you need it. If you do not use it, you are not paying interest. Interest is only charged when you write a cheque on it. One of the most flexible credit arrangements IMHO!

Yes, we have that kind of home credit line as well. Interest right now is only 3%! It's great when you need quick money for something (repairs, maintenance) and easy to pay off.

 

[AppleDisneyDad]

I did this exact thing earlier this year. I used a line that has a 3% rate to maintain cash on hand for emergencies. I could have chosen to pay it off but in the interest of my personal peace of mind I used the line.

It took about 2 weeks to set up and since there are no costs for not using it, it was a matter of preference not need.

 

[Anthony1971]

While I understand reasons for and for not Financing... in the end it is a personal choice.
However while the rate may be low you are in the end risking your house for a luxury item. I would only use a home equity loan if I had no other choice.

As another suggest I would look into Credit cards that offer 0% for a period of time pay as much as you can and then look for another or pay what they want it should average well.

 

[Moniqu17]

Thanks everyone... I'm wondering if I do the credit card if you can get points or if that's only for actually charging things? We use our cc's for everything but then pay them off each month. Helps us fund our vacations

I also like the idea of the flexible home equity loans. We could open one and then it would be available for when we need the money! Great idea

Also, I do understand that loans can be risky, but for us we just don't want to dip into our savings that much at once. We are already doing a 15 yr mortgage, 401k, roth... come from a family of bankers Plus I was one of those people who were laid off for a while so we are low risk takers.

 

[Dean]

First of all, I'm not looking to spark a debate but I am hoping for advice on trying to finance a resale and how it fits into the overall timeline.

Currently, we just signed our contract with Fidelity and I assume it will go to ROFR within a weeks time. We'd like to finance using a home equity loan since our bank has a 5% fixed option. I know people don't like the option to finance but we are financially sound and for personal reasons want to finance for 2 years. Has anyone used a home equity loan before? We are setting up an appt with the bank but it's a few days out. Just curious because if Disney exercises ROFR (which they very well could) then I don't need the loan, but is there enough time between passing ROFR and needing to send the final payment using home equity? Looking at recent timelines, it looks like it takes about 2 or more weeks (using Fidelity) between passing ROFR and sending payment.

Thanks!

While I don't think financing a luxury purchase or risking one's house on such a purchase is a good idea, many have done so. Only you know your risk tolerance and situation and the interest rate is much better than you'll get anywhere else. Another option that's better for some is to leverage investments such as CD's and borrow against those The problem with low or 0% CC options is there are situations where that reduced rate can go away without notice at the whim of the CC company. Basically I'd look at it like if I lost my job tomorrow where would I be.

 

[agie65]

Thanks everyone... I'm wondering if I do the credit card if you can get points or if that's only for actually charging things? We use our cc's for everything but then pay them off each month. Helps us fund our vacations

I also like the idea of the flexible home equity loans. We could open one and then it would be available for when we need the money! Great idea

Also, I do understand that loans can be risky, but for us we just don't want to dip into our savings that much at once. We are already doing a 15 yr mortgage, 401k, roth... come from a family of bankers Plus I was one of those people who were laid off for a while so we are low risk takers.

If you are a responsible purchaser then HELOC is the best to finance such a purchase. You can deduct interest in your tax if you itemize. You can create HELOC and use your savings to pay for purchase and use HELOC for rainy days. I have beaten the banks on their own game like this, but you should be very cautious about the use of HELOC because it is against your equity in your house. Good luck with your purchase.

 

[Moniqu17]

I agree... we always go into every situation asking ourselves 'what if' since we were in that situation before. That's why unless it's a big purchase like house or car we always save up and have the funds available. And even though we have the $... we still want to take 2 yrs to pay for it. I know it makes zero sense to most people, but if anything happened we could pay it off if need be. Plus I calculated it out and at 5% it would be less than $5 extra pp in interest.

I do think we will take the less risky approach and go with the home equity revolving line of credit.

 

[nowellsl]

.I do think we will take the less risky approach and go with the home equity revolving line of credit.

I'm sure you'll check, but normally lines of credit involve a variable interest rate - although you probably don't need to worry considering interest rates don't look like they're going up any time soon.

 

[macd77]

I work at a bank and a equity line/loan is a good option, BUT if you choose variable/revolving just realize that interest rates are only going to go up and IMHO it could be as early as the end of this yr/beginning of next. In most instances people choose lines of loans and again that rate is tied to Prime, which today is at 3.25% and has been stuck there for years. Risky not so much, but risks to consider yes.

And the elephant in the room with most refinances and 2nd mortgages/equity lines are the appraisals. I have seen a lot of people get burned because the values are still not where people think they are, but its definitely improving.

 

[agie65]

I work at a bank and a equity line/loan is a good option, BUT if you choose variable/revolving just realize that interest rates are only going to go up and IMHO it could be as early as the end of this yr/beginning of next. In most instances people choose lines of loans and again that rate is tied to Prime, which today is at 3.25% and has been stuck there for years. Risky not so much, but risks to consider yes.

And the elephant in the room with most refinances and 2nd mortgages/equity lines are the appraisals. I have seen a lot of people get burned because the values are still not where people think they are, but its definitely improving.

Right now still a possibility to get HELOC at prime or prime minus. Even if prime goes up by the end of the year or next year likelihood you will be ahead in the game in regards to total interest paid. Again these interest are TAX DEDUCTIBLE.

 

[Moniqu17]

Yeah, I think even if interest rates are to increase, which is inevitable at some point, that we should be ok since we will pay the loan off so quickly. I can't remember the specifics but I think they can only increase the rate by so much each year.

Also, we refinanced a couple years back so having the funds shouldn't be a problem, but yes very real problem still in today's market!

 

[lorie13]

Also if you have a Disney Chase Visa card and do a direct DVC purchase there is 6 months 0% available (up to $10,000)

 

[crisi]

We use home equity all the time.

 

[e46m3]

Have you considered borrowing from your 401K?

 

[Moniqu17]

We feel borrowing from our retirement is too risky for us... I know we'd pay it off but you never know when you might want to change jobs etc and then your on the hook to pay it off asap. The jobs market has really picked up around us so you never know what could happen!

 

[e46m3]

If speed is a concern, you could apply for your line of credit and also get a 401k loan. The 401k loan would be cut you a check in a matter of days, and when you home equity loan is approved you can pay off your 401k loan. The 401k interest will be a little higher but you are paying yourself that interest, where as the HELOC you are paying interest to the bank. Just a thought. Hope all goes well!