Home Equity Loan Questions
Author: usmsci
Joined: 18 Aug 2005
Posts: 38
Posted: Tue Sep 27, 2005 10:54 am Post subject: Home Equity Loan Questions
I bought my home in April for around $110,000. its a nice 3bed and 2 bath, brand new, never been lived in, roughly 1,450 sq.ft.
anyway April of 2006 i will have had it a year and want to take out a home equity loan on the house. the first question is, is this too soon or is a year ok? will the house need to be appraised again? how much would i expect on average to get?
if i was approved for 20,000 does that just get added on to the existing balance on the house/mortgage and they just write me a check for 20k?
my interest rate is 5.5% as a Fixed 30-yr mortgage. could i suffer a higher interest rate if i get a equity loan or not? i want to pay off my car(which i am paying 15.99%) and do some home improvements inside and outside the house. a 5.5% instead of 15.99% on a car is going to save me lots of interest money.
i figured it out and it would cost about 20,000 for everything that i wanted..of course i am flexible. This includes putting $1,000 or so in a ROTH IRA to get that ball moving and possibly putting money in a few other places.
my credit wasnt the greatest when i got my car loan and i am paying for it but now my credit is better.. FICO score is 656 and i was approved on the house with a score of 626-650 or so using all 3 reporting agencies. i calculate that i will be close to 700 by April rolls around as i have some negative information coming off my credit report at the end of the year.
i might think of some more to say but thanks in advance for all your advice..
Author: Polonius
Joined: 19 Jan 2004
Posts: 1074
Posted: Tue Sep 27, 2005 3:41 pm Post subject: Home Equity Loan Questions
The HEL or HELOC is completely separate from your mortgage--it will have its own terms and interest rate. There's no "too early" notion about applying for equity loans--everything depends on the equity of your home today and of course your own income and debt to income ratio. Each lender makes its own decisions on what you would qualify for. I'd suggest getting offers through LendingTree.com--they're free and will give you an idea of what you can get.
I live in what one magazine called the second most overpriced housing area in the country! Prices go up over 15% per year here. That's bound to come to an end, hopefully not soon.
Of course, leveraging your housing equity to the maximum can land you in trouble if prices fall. You know that.
Author: usmsci
Joined: 18 Aug 2005
Posts: 38
Posted: Tue Sep 27, 2005 3:44 pm Post subject: Home Equity Loan Questions
How do these terms and rates compare to regular mortgage rates? Are they comparable??
Author: Polonius
Joined: 19 Jan 2004
Posts: 1074
Posted: Tue Sep 27, 2005 4:16 pm Post subject: Home Equity Loan Questions
According to
www.bankrate.com/brm/static/rate-roundup.asp
Thirty-year fixed rate mortgages--Rate: 5.88 percent (30-year fixed) Average Points: 0.36
..............................................................
Home equity products
Rates: 6.76 percent (line of credit); 7.18 percent (loan)
But there are special deals all over the place--these are just averages; you could do better or worse. My own Citibank HELOC is at prime less .25%, so 6.5% now--and it had no closing fees of any kind (no points, no appraisal fees--nothing). And I only have to pay the interest for the first 10 years--no principal payment required until the 11th year.
Author: BestMortgageInfo
Joined: 16 Mar 2005
Posts: 29
Posted: Tue Sep 27, 2005 8:09 pm Post subject: Home Equity Loan Questions
Yes, an appraisal will have to be done for the new loan. In some cases lenders will pay for them, and have a 3 year prepayment penalty to recoup the costs if you pay off the loan early.
Be careful of HELOCs. Your initial lender may report it as a mortgage type loan, and the lender that buys the loan may report it as a credit line. A credit line, where you have over 50% Utilization, can really hurt your credit score.
HELOANS are fixed rate 2nds. The initial rate may be higher, but it won't go any higher. Or lower. Stability and no surprises are sometimes worth a few $ per month.
Lastly. I do mortgages, and I do my best to talk people out of paying for a car over 30 years. Some of them don't last that long. With your scores, try to refinance. One on line Auto refinance company is Patelco. You can probably cut your rate in half or better.
Joined: 18 Aug 2005
Posts: 38
Posted: Tue Sep 27, 2005 10:54 am Post subject: Home Equity Loan Questions
I bought my home in April for around $110,000. its a nice 3bed and 2 bath, brand new, never been lived in, roughly 1,450 sq.ft.
anyway April of 2006 i will have had it a year and want to take out a home equity loan on the house. the first question is, is this too soon or is a year ok? will the house need to be appraised again? how much would i expect on average to get?
if i was approved for 20,000 does that just get added on to the existing balance on the house/mortgage and they just write me a check for 20k?
my interest rate is 5.5% as a Fixed 30-yr mortgage. could i suffer a higher interest rate if i get a equity loan or not? i want to pay off my car(which i am paying 15.99%) and do some home improvements inside and outside the house. a 5.5% instead of 15.99% on a car is going to save me lots of interest money.
i figured it out and it would cost about 20,000 for everything that i wanted..of course i am flexible. This includes putting $1,000 or so in a ROTH IRA to get that ball moving and possibly putting money in a few other places.
my credit wasnt the greatest when i got my car loan and i am paying for it but now my credit is better.. FICO score is 656 and i was approved on the house with a score of 626-650 or so using all 3 reporting agencies. i calculate that i will be close to 700 by April rolls around as i have some negative information coming off my credit report at the end of the year.
i might think of some more to say but thanks in advance for all your advice..
Author: Polonius
Joined: 19 Jan 2004
Posts: 1074
Posted: Tue Sep 27, 2005 3:41 pm Post subject: Home Equity Loan Questions
The HEL or HELOC is completely separate from your mortgage--it will have its own terms and interest rate. There's no "too early" notion about applying for equity loans--everything depends on the equity of your home today and of course your own income and debt to income ratio. Each lender makes its own decisions on what you would qualify for. I'd suggest getting offers through LendingTree.com--they're free and will give you an idea of what you can get.
I live in what one magazine called the second most overpriced housing area in the country! Prices go up over 15% per year here. That's bound to come to an end, hopefully not soon.
Of course, leveraging your housing equity to the maximum can land you in trouble if prices fall. You know that.
Author: usmsci
Joined: 18 Aug 2005
Posts: 38
Posted: Tue Sep 27, 2005 3:44 pm Post subject: Home Equity Loan Questions
How do these terms and rates compare to regular mortgage rates? Are they comparable??
Author: Polonius
Joined: 19 Jan 2004
Posts: 1074
Posted: Tue Sep 27, 2005 4:16 pm Post subject: Home Equity Loan Questions
According to
www.bankrate.com/brm/static/rate-roundup.asp
Thirty-year fixed rate mortgages--Rate: 5.88 percent (30-year fixed) Average Points: 0.36
..............................................................
Home equity products
Rates: 6.76 percent (line of credit); 7.18 percent (loan)
But there are special deals all over the place--these are just averages; you could do better or worse. My own Citibank HELOC is at prime less .25%, so 6.5% now--and it had no closing fees of any kind (no points, no appraisal fees--nothing). And I only have to pay the interest for the first 10 years--no principal payment required until the 11th year.
Author: BestMortgageInfo
Joined: 16 Mar 2005
Posts: 29
Posted: Tue Sep 27, 2005 8:09 pm Post subject: Home Equity Loan Questions
Yes, an appraisal will have to be done for the new loan. In some cases lenders will pay for them, and have a 3 year prepayment penalty to recoup the costs if you pay off the loan early.
Be careful of HELOCs. Your initial lender may report it as a mortgage type loan, and the lender that buys the loan may report it as a credit line. A credit line, where you have over 50% Utilization, can really hurt your credit score.
HELOANS are fixed rate 2nds. The initial rate may be higher, but it won't go any higher. Or lower. Stability and no surprises are sometimes worth a few $ per month.
Lastly. I do mortgages, and I do my best to talk people out of paying for a car over 30 years. Some of them don't last that long. With your scores, try to refinance. One on line Auto refinance company is Patelco. You can probably cut your rate in half or better.
