5/30 interest only Home Equity Loan question
Question: My lender is promoting taking a fixed 30 yr on 80% of my new home. He also suggests taking a 2nd for 25K (best rate threshold) and that one would be a 5/30 Home Equity Loan that is interest only. My down payment would be about 35K so I do have some dollars in the place.
I don’t know a lot about this setup but am interested in hearing people’s opinions..
Answer: So what’s his reasoning? Taking out a second mortgage or a HEL is a fairly standard way of avoiding having to pay (non tax deduct able) mortgage insurance. However, I’d think that doing an interest-only HEL would sort’ve negate a lot of the advantage, since it sort’ve assumes that you’ll be refinancing the whole shmoo in five years (or selling out by then). Personally, I think there are enough inflationary pressures on the current US economy that I wouldn’t want to be on home loan rates being any where near as low in five years as they are now (but, hey, if I could see into the future, I’d be rich).
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