Need downpayment…recommended source?
Question: I am purchasing a piece of raw land (5 acres) on a Deed of Trust. The purchase price is $105,000. We have agreed upon $30,000 down and financing it at 8.0% interest and amortized at 30 years (with a 5-yr balloon). I plan to build a house on the property in approximately 1 year. At that time, I will sell my current home and get a construction loan to close out the land sale and finance the cost of home construction. My question is this:
I do not have the $30,000 down (liquid), without selling my home. I figure that I have about $50,000 equity in my current house. What would be the best (least costly) way for me to get the $30,000 downpayment? The obvious is a no cost home equity loan, but I’m also considering rolling it onto an “introductory rate” credit card and then continuing to roll it for up to one year. Is this a reasonable method? Are their others I have not considered.
Answer: Off the top of my head (and without knowing more about your situation) I’d say the home equity loan is the best way to go, unless you can get an interest rate somewhere else that is enough lower to offset what you’ll save on income tax. I’m assuming you can itemize and if so keep in mind that interest on the home equity loan will be deductible, whereas credit card interest never is.
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Filed under: Home Equity Loan
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