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Cash-Out Refinance or Second Mortgage? If Second Mortgage…home equity loan or HELOC?My 2-family home is valued at 375K. I have 12 years and 88K on it left. My current loan is at a 4.9 interest rate. I need to borrow 220K and need it in lump sum. With todays rates being around 6.5 for a 30 year, I know refinancing is out of the question. Which would be better for me, a HEL or a HELOC? What would my payments be for 30 years, 15 years? Thanks
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July 1st, 2009 at 9:28 am
It all depends on the difference in the value of the place and the amount owed on the loan – that is what's considered your equity. Many banks will only loan up to about 80% of the equity, but a few go higher. For example, lets say you owe $50,000, but the place is worth $60,000, then you have $10,000 in equity. Take 80% of that and you have about $8,000 you could loan against.
I found a great article about it on
http://www.payoffmyloansnow.com
July 1st, 2009 at 10:00 am
A refinance with cash out would save you money in the long run. The interest rate would be lower for a 1st mortgage.
If you refinanced for a lower interest rate, you would be required to pay for the refinance and other closing cost.
Now if you turned around immediately and got a second mortgage or a Home Equity Line of Credit (HELOC) you would once again be required to pay for the loan as well as any related closing cost. On this 2nd mortgage the interest rate would be 2%-3% higher.
For any legal or tax matters you should consult with your attorney or tax consultant.
I hope this has been of some use to you, good luck.
"FIGHT ON"
July 1st, 2009 at 5:58 pm
you can get cash above the payoff for your car if you have enough equity to meet the LTV guidelines for the bank, and still have room. Check with all the local banks to see what their guidelines are, and what they would lend on your car.
July 2nd, 2009 at 12:43 am
They’re both bad ideas. You want to owe as little as possible in comparison to your home’s value, anything you do to increase the amount you owe puts you in a a bad financial position. The biggest point to understand is that your home is not a bank, and should never be treated like one if you want to keep it.
A good number of the people losing their homes now took out these types of loans. Some of them had financial issues and couldn’t keep up with increased payments. Others just suddenly had to sell for various reasons. In either case, when selling was the only option, these people were in serious trouble because they didn’t have the equity to sell and pay the necessarily fees.
Think about it for a second: if you have to borrow to get access to this cash, where would you get money to make up that difference if you suddenly had to? Let’s say you owe $100,000 on a $130,000 home, and you cash out $20,000 (you probably can’t get 90% of your home’s value) so that you now owe $120,000. What if you suddenly had to put your home on the market tomorrow?
Let’s say you manage to sell the home for $130,000. If you make it through the sale without having to make any repairs to the house and you’re not paying any closing costs (all of which would be a miracle in a buyer’s market), at a 6% commission you’ll wind up with $2,220 left over. That’s a pretty narrow margin these days. If you had never treated your home like a bank, you’d have a cushion of $22,220 instead to make your sale happen.
No one ever thinks they might have to sell tomorrow, but many other people have been in that spot and learned the hard way that they were wrong. Unless you need the money in your home for something vital (like say a life saving operation), don’t touch it!
July 2nd, 2009 at 3:39 am
get a job!!!!!?
July 2nd, 2009 at 8:29 am
I don't see how you could because I would think the new bank would need to have the CD in their bank before they give you the secured loan. Obviously, you can't put the CD in another bank because it is being used as security for the original loan. Talk to you bank where the loan and CD is about refinancing.
July 2nd, 2009 at 6:37 pm
Texas state law says that the only way you can do a 100% on the first refinance after the purchase but the only way to do that is if you still owe 100% of what the house is worth because you can't get cash out. If you wanted to do cash out you could but you would not be able to go above 80% loan to value due to Texas state law.