Answers
We are refinancing our first mortgage. We have a second which is a home equity line of credit at 7.78% We can probably pay it off in 10 years. Should we roll it into our first and refinance both at 5.20% for 30 years? Would the difference in interest rates offset the extra 20 years of payments?
You do not mention how much you owe on the home equity line of credit, so I cannot tell you the difference between the savings from the lower interest rate vs. the extra years of payment.
Nevertheless, I recommend that you DO roll it all into one mortgage. You can always pay extra on principal if you want to pay off your home sooner, but it would be better, in my opinion, to set aside any extra money into a liquid savings account instead.
Funds you pre-pay against your mortgage will save you money in total finance charges, but the equity you build up that way is equity you cannot get to except by selling your home or borrowing against it.
By comparison, money you set aside in a liquid savings account is always available to you and will earn interest. Eventually, the interest rates could be higher from your savings than you are paying on your 1st mortgage loan, especially if inflation increases in the coming years.
Eventually, if you are a disciplined saver, you will have enough money set aside after 15 years or so to pay off your mortgage in full. In the meantime, you'll have access to an emergency fund if anything happens.
torontosecondmortgages.com | When does a second mortgage make sense? Second mortgages are an excellent tool for personal credit repair. Second ...
I'm not exactly sure what you mean here, but I don't think it's entirely accurate.
A Home Equity Line of Credit(HELOC) is based upon the prime rate(an index) which in turn is based upon the over night Fed Funds rate. The Fed Funds rate adjusts monthly according to the Federal Reserve's meetings (Greenspan in the past).
HELOC's as 2nd mortgages are higher than some 2nd mortgage loans right now because the index that derives their rate(Fed Funds & Prime) is higher than several fixed 2nd mortgage indicies.
Typically, the payment for HELOC's is interest only. To see what your payment is here's a link to a mortgage calulatore on my real estate site: http://www.nnnstore.com/mortgagecalculat or.php
The typical loan term is 30 years. To find out what your interest only payment is put in a loan term of 2400 years.
For years though, HELOC's were even less than first mortgages with interest rates as low in the 4's.
2nd mortgages tend to be at a higher interest rate than 1st mortgages, typically. The reason is because in the event of foreclosure there is an order for paying off liens, known as position. 1st mortgages would be paid off fully first because they are in a higher position than a second mortgage.
My husband and I are currently paying PMI (Private Mortgage Insurance) on our mortgage. (We have no second mortgages.) I know we need twenty percent equity in order to eliminate PMI, but I don't think we're quite there. Is taking out a home-equity line of credit to pay down the mortage a good idea? I know that we'd then have two loans to pay, but the PMI would be eliminate and all of our payments (minus the interest) would be going toward the loan rather that insurance. Is it possible to get a home-equity line of credit for 6%?
To eliminate PMI you have to get an appraisal done to verify the your equity. An equity line of credit is a variable rate based on prime rate. I believe it is around 7-8% right now. I personally feel PMI is ok becuse HELOC's are adjustable and you would end up paying more interest over time than insurance in most cases. You should contact your bank to see how and when eliminate you can stop paying this insurance (sometimes you cannot eliminate PMI for at least two years). If you calculate your interest payments on the HELOC to be less than PMI and you can pay the balance off quicker than having the insurance for two years then it's a winner.
I need a home equity line of credit loan
Chase has taken away my line of credit.This is not because of my credit score or equity.They are getting out of the second mortgage business slowly but surely.My credit score is over 700 and my equity is fine.I would appreciate any feedback on any banks or lenders
11 hours ago - 4 days left to answer.
The interest rates on HELOCs, along with the restrictions and fees are so bad right now. I would think you would rather have a personal line of credit with a bank. If you have strong credit and some personal assets you might be able to get a reasonable LOC from your bank.
my girlfriend has a condo in los angeles which is worth 300K. She tried to start a business and quit her job 2 years ago. well suffice to say the business is and was not going too well so she went out and got a home equity loan of 50K. She squandered that money and got 25K line of credit. Mind you she doesn't have any income (REAL JOB) coming in except some money coming from her business and her credit lines.
I just found out she has an ARM mortgage on her condo which she was paying interest only and now it's about to go up to 2500 dollars a month. She finally got off of her but and got a real job paying pretty well for L.A. and She decides to rent out the place and move in with a friend to help pay for mortgage, line of credit, and equity loan because she is upside down on the property. Now that she has a tenant in her condo, she is now trying to buy a foreclosed house with her friend. Is this possible with all the mortgage dept she has? She has only been working for 2 1/2 months.
side note:
she has a credit score of 801.
she pays all of her bills on time and in full.
she was late a couple of times on her line of credit loan.
Is this legal? Can this be done?
An excellent credit score can only help her to get a good interest rate. The lender still has to check her income/debt ratio. If it's too high, they'll denial her application. If her friend also has excellent credit plus a high pay job and no debt, she has higher chance to get the loan.
Obama Government Plans to Address the Second Mortgages ...
Obama administration had issued new guidelines for the foreclosure prevention program, which addresses the issue on how to deal with borrowers with second mortgages and equity loans. Reports from Credit Suisse Group show that more than 50% of those borrowers have opted for a second mortgage. Obama administration’s $75 billion program was severely criticized by mortgage investors. These investors were mainly from securities and they did not like it because second mortgages were neglected in the program. Insurance firms, hedge funds and pension funds are included in the list of these investors.
...
News
Credit crunch: Home equity lending evaporatesChicago Sun-Times - Dec 29, 2009
Their home's value fell from $279000 to $180000. They could no longer afford to make payments on either their first $200000 mortgage or the home equity loan and more »Chicago Sun-Times - Dec 26, 2009
Record-low mortgage rates, but many can't refinanceIf you've got a second mortgage on the house, be prepared for problems. The lender might refuse to subordinate, or if you have a line of credit, and more »Huffington Post (blog) - Dec 31, 2009
From that filing, we also know that Goldman's return on that equity was 7.7% for that quarter and 14.2% for the first nine months of that fiscal year (bothMinyanville.com - Dec 30, 2009
According to FDIC Quarterly Banking Profiles, home equity loans peaked at $674 billion at the end of the first quarter of 2009 with this loan category down and more »USA Today - Dec 30, 2009
And he can't get a home-equity loan to pay off his other debts. His wife recently took a part-time job at Barnes & Noble, and DeGeorge filed for Chapter 13 and more »RealEstateRama - Dec 30, 2009
During periods of exceedingly difficult municipal capital markets, MHDC partnered with the Federal Home Loan Bank of Des Moines (FHLB), privately placing and more »Wall Street Journal - Dec 12, 2009
At the time, I didn't know that the second loan was a de facto home-equity line of credit. I knew it would be a higher rate–a little more than 2.5 and more »