Home Equity Loan Question
Question: I have 30K and 9 years remaining on a 9.875/15 yr home loan. I >want to refinance at a lower rate for 10 yrs and pay off the >loan early (5 years or so) depending on my financial status in >the coming years. In working with the loan officer of a local >bank, they suggested I take out a home equity loan at 8.9% for >the full amount for 10 years and then pay it off early if I so >desired. Per the calculations this makes sense as their are >no fees with this loan as opposed to the regular mortgage >refinance. >My question – are there any problems with this approach? I >can’t come up with any.
Answer: Frequently home equity loans are issued on a floating rate. You may want to see if this is true in your case. You may end up running a considerable risk if the interest rates change sharply upward during the time you are paying on the loan
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