By Admin on Jan 21, 2010 in Renting & Real Estate
nikunjd05 asked:
Is it possible to pay off the mortgage with an home equity loan if the APR is less than what I am paying right now? I understand that if I refinance, there are closing costs and for home equity loan, there are none, am I correct? What are the advantages and disadvantages of doing that? Please advice.
Is it possible to pay off the mortgage with an home equity loan if the APR is less than what I am paying right now? I understand that if I refinance, there are closing costs and for home equity loan, there are none, am I correct? What are the advantages and disadvantages of doing that? Please advice.
PAID, and yes it can IF the equity lender allows this.
Common Sense | Jan 22, 2010 | Reply
yes you can do that if your home equity line is large enough. home equity loans do not call for principal payments so you only have required interest payments. this will have to be refied when home equity matures. i wonder what rates will be like then?
David Z | Jan 25, 2010 | Reply
It depends on the rate you are paying now and how long you are keeping the house . The disadvantage is that home equity loans can go up to a point where you will be paying much more than you are paying now .
Anthony | Jan 27, 2010 | Reply
It depends if your equity allows this. Try to seek for professional advice first before anything else so that you would completely understand.
Ernest | Jan 29, 2010 | Reply
Banks do home equity loans with little or nominal fees ($250 or less). Generally speaking, banks will do a Home Equity Loan (HELOAN) up to 85% of your homes value.
If your loan amount is over 120k and your credit score is above 720, you should be able to get a traditional mortgage 30 year mortgage without closing costs anywhere from 5.5% to 5.75%. The larger your mortgage is, the easier it is to do this.
Your options/decision can be determined by speaking with a few different lenders who will need to know the following:
Credit score
Loan amount
Value of home
How long you plan to own the home
The advantages of a HELOAN are:
Potentially no appraisal needed
Pay off any kind of debt- cashout without rate adjustments
Quick transaction, less paperwork
Low or no cost regardless of loan size
Disadvantage of HELOAN:
Higher rate than a traditional mortgage
Amortization is usually maximum of 20 years- possibly making the payment higher than it is now.
Escrows for taxes and insurance will have to be paid separately
Advantage of a traditional mortgage with no closing costs (assuming you can get one):
Lower rate than HELOAN (based on industry averages)
30 year amortization
Disadvantage of traditional mtg:
Potential barriers- Loan too small, not enough equity, credit score score too low
More paperwork
Longer process over Equity Loan
Todd Lipps | Jan 31, 2010 | Reply
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Mary J | Feb 3, 2010 | Reply
Yes it is if your donor allows you and it will give you more advantages like following,
* They typically have a lower interest rate (or APR)
* They are easier to qualify for if you have bad credit
* Payments on a home equity loan may be tax deductible
* Borrowers can get relatively large loans with this type of loan
rember | Feb 7, 2010 | Reply
Answering first part of your question – yes you can. This is just a matter of technicality. If have open equity line of credit you just request a check, you are depositing this check into your back account and the next step – you are sending your personal check to your lender. This is it. Your mortgage is paid off from that moment.
Second part of your question – does it make a financial prudence? Well, technically it is very much possible. Lets say you have $150 K 7% current mortgage and 12 years to go with this one. Your home equity line allows you to take $150K for 10 years under 5%.
So it make a lot of sense.
Luba | Feb 9, 2010 | Reply