Is it better to get a home loan thru home equity line loan?
Typically home equity loans have variable interest rates ... the very same type of rate programs that a causing the havoc in the current banking and real estate market. If your rate is fixed for the term, you will have predictable payment streams that you can budget for. If the rates are variable, and the underlying market rate goes up again, you may be asking for trouble. Try to get low fixed rates that you can pay off as quickly as possible. Having your largest asset at risk in case you experience job loss or other financial loss really sucks ... believe me, I speak from experience.
Good answers so far.
First, avoid a variable interest rate. For almost the same APR you can get a fixed rate and not worry if rates go up.
Second, think hard about an equity line. Many people have gotten into trouble with these because they lack discipline and treat it as a source of 'free money'. They end up in even more debt. I'd suggest you determine how much you need and only borrow that amount, or if you do get a credit line, pretend that's all that's available. You'll still have the rest for an emergency.
Third, the interest rate on a home-secured loan is usually lower than any credit card. Using that equity line to pay down your credit cards is very tempting due to the lower rate. If you do this, keep your payment amount the same. It doesn't make sense to amortize a 3-year revolving line of credit over 10 or 15 years in a home equity loan even if the interest rate is lower. If you keep your overall payment amount the same as now (all credit cards + 2nd mortgage/home equity credit line), you'll retire the debt faster which is a good idea.
Whether you get a 2nd mortgage or a home equity line, keep your paid-off credit cards in a box instead of canceling them. You still have them if you have an emergency (such as losing or changing jobs or high medical bills) but don't take them out to buy a new tv or something similar. Also, even if you have great credit if all your existing accounts are maxed out or nearly maxed, your overall credit rating suffers. It's better to keep a couple of zero-balance credit cards for this reason, too.
Finally, read the fine print carefully. What happens if you're late with a single payment? You APR may double. Read the other terms and think about a worst-case scenario and how that would effect the loan.
My wife and I took out all the equity of our paid for home. At first the interest was only 3.25%. Over a couple of years it inched its way up to 8%. We finally 'got lucky' and locked in a fixed at 6%. I say lucky because if you search for historical interest rate history you could be in for shock.
I now use my home equity line of credit to buy a few houses cheaper because it's a cash deal. Then we refinance if possible to get as low a fixed rate as possible.
Debt in general is the Devil's Way to make sure 'The Poor you have with you always'. But if you can plan it so you make MORE money off of other people's money (ie, the bank's money) -- i say if you make more money than you are paying out in interest, then you are a capitalist!
Beware of interest rates climbing out or your reach.
Good luck.
Home equity loans make a great option for refinancing, but there are some important factors that should be taken into consideration, before taking any decision. Generally speaking, there are 2 types of lenders offering home equity loans. One that offer you loan with low cost refinance & other which give 'no cost' refinance home equity loans to the borrower. When ready to take the crucial decision, have thorough research about your lender and the offer you are getting. Take extra care to check, you are not being ask to pay higher rate of interest or additional fee. A rare edge that home equity loans get against other loans is that you don't need to pay cash by closing costs on your loans.
For more on refinancing mortgage: http://www.4refinancemortgage.com/torefinancemortgage/refinancinghomeequity.html
0 ความคิดเห็น:
แสดงความคิดเห็น