home equity loan vs. refinance
Question: Check the interest rates before making a decision. Usually refinancing will get you a better rate than a home equity loan. Also be sure to compare closing costs and points. Either way you will have to pay some closing costs, and go to a closing, just like when you originally bought your home. And keep in mind that they will do an appraisal (which will be one of the charges in your closing costs), and you will also have to pay title insurance again, and the closing companies document prep fee, credit report fee, etc. Shop around and have each finance company put the figures down on paper so you can take them home and take your time looking over the figures. Now is a great time to do this, as interest rates are very low, and who knows how long they will stay that way?
Answer: I have been through a similar issue. My home appraises at $165000, and I have a $70000 15 year first loan at 7%. I could refi, and get a 120,000 30 yr 6.8% loan and pay $3000.00 in points and fees (is this tax deductible methinks a refi does not count?) or take out a 8.5% equity line. Now looking at the math
70,000 15yr 7% 1st – $714.00 /mth (ends in July 2010) 50,000 equity 8.5% – $354.00 /mth (bal in July 2010 $50000.00)
120,000 30yr 6.8% 1st – $774.00/mth (bal in July 2010 $98150.00)
So doesnt take much to figure I should go for the refi. Actually I decided on the equity line. Convenience was the whole reason. I made the phone call at 12:00pm and at 3:00pm I was cleared for a $50,000.00 equity line (although that is not the whole story as I have to sign papers and wait for the loan to fund – approx 7 days). Now I have heard of folk getting home loans in 7 days, but my experience is 2 – 3 weeks, and some real nailbiting and record checking to get the job done. Also I figure there is a good chance I will sell my home in the next year or two, and I was given an introductory teaser rate of 5.25% for the first 10 months and I just love not having to write any checks to get this accomplished.
I have been playing with these figures all day to really see if I have gone soft in the head.
If your place is worth 150,000.00 much easier to get loans if only go to 80% LTV ($120,000.00). Once you go over this will have to pay PMI ($50/mth) have to deal with an impound account, or go to a higher interest portfolio loan. You can get conventional FMAC loans on a 4 unit property, but they will only use 75% of the rents for your monthly income calculation.
Now does anyone know whether interest paid on an equity line is tax deductible.
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