Home equity loans (pro and con)
Question: I’m one who pays bills as fast as possible and uses the credit card very >sparingly. I say this because the manager of my bank called about a >favorable rate for a Home Equity loan, something around either 4=% or >4>%, “very close to prime.” Has anyone here been involved with such a >loan, thus able to offer pros and cons? It’s hard to imagine that such a >loan could be used to pay off a mortgage. What’s in it for the bank?
Answer: Probably an adjustable rate, guarenteed to go up to somthing outragous in the near future. No, you don’t want to pay off a 1st mortgage with a home equity loan because a home equity loan is also a mortgage.
One big gotcha on Home equity loans that we see a lot. People think that home equitly is free cash and like to spend it. But when it comes time to sell their house they have no equity. Therefore they have nothing to use for a downpayment on a new house. This is very bad. Even worse, they end up having to bring money to the table to sell their house because they have ne equity to pay the realtor’s commision and sellers closiing costs.
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