Equity flash of credit a perfect notion to clear rotten my mortgage?
I called my mortgage company today and asked about a refinance. I am not aft, or in forecloser. He did not offer me a right rate, but he did talk about a equity dash of credit to pay off the mortgage. I currently hold a ARM loan, (I know not good), but thats why i called and tried to get a fixed rate.
He said if I whip a equity line of credit, to pay bad the balance of the house I would have to money no fees, or closing cost. Which means that my mortgage would have a 0 ballance. My credit is OK, I owe smaller amount then 1/2 of what I borrowed. My ARM interest rate is 7.125%, and he said he could get me the Equity chain of credit at 4.5% Is there any catch to this, is this a fitting idea, or bad impression. Please help
Answers:
If you use an equity line of credit to "pay stale your mortgage loan" - you will have a new loan on your house! An equity dash is money still secured by your house. Your "mortgage" will not have a zero be a foil for. Also, I have never heard of a "fixed rate" equity row! As for no fees, closing costs - that is possible if he is getting paid by the lender and covering the fees, but he have to make a profit somewhere!
If you have like mad of equity in your house, you should easily qualify for a fixed rate first mortgage at a dutiful rate. Consider paying extra points on the loan to secure a better rate. Just calculate how long it would lift to make up the difference between the cost of the points and paying the rate on your current ARM loan. If it is just a few years, it might be worth it.
Don't be "taken".
Good luck!
This is actually a method that many relations use to accelerate the payoff time of there mortgage by linking a HELOC to your mortgage. It have been used for years in other countries and is very soon starting to catch on here. The wonderful thing around it is that you don't have to refinance and make no extra payments. It in truth has the effect of lowering the daily set off on your principal which lowers the interest.
You can learn more about how this system works and how it calculate your payments every month at this website: http://www.mortgagemagicsoftware.com Source(s): http://www.mortgagemagicsoftware.com
The 4.50% is likely not a fixed rate. It will adjust next to prime.
Is this in your best interests, or his?
Why can't you refinance to a low fixed rate, if explicitly what you want?
Did they offer to pre-approve you for free, to get the loan you asked for, or purely attempt to steer you in the direction they want? Source(s): Profile
Yeah there is a shut in, they are not even breaking even with 4.5, they are paying more......so obviously in attendance is a catch.
Try refinancing with another wall.
i think u try http://pisco.tk > Loans Section
Might not be tax deductible. Would make sure the equity stripe of credit is fixed and no penalty for early compensate off. I have not hear of this before but it sounds like the mortgage remains except beside a zero balance. Technically it should work since when you gain the line of credit you can use it for whatever you want. Just will not be capable of record the deed within your name since technically they are still the lien holder.
Uh...you can't use an equity row to pay off your mortgage, because you would still own to pay back the equity queue, which is ANOTHER ARM!!
Think about it, if you owed Bank of America $100K and I gave you a loan for $100K, and you rewarded off BOA, you will still owe me $100K.
Yes, there IS a shut in to it. The 4.5% is ANOTHER ARM rate and will adjust and some of them even adjust monthly.
Your payment will go nowhere but up.
Better plan: The fixed rates are LOWER than 7.125 right in a minute, especially for about 50% LTV...so get him to do a rate/term refinance (which vehicle no cash out) on a 15 year (not 30) note.
That means of access, you can have your mortgage 100% PAID OFF very soon.
PS: ALL INTEREST remunerated in mortgage interest on your PRIMARY residence is ALWAYS tax deductable.
There is also no such point as not paying closing costs or fees. That is why those programs are called no "out of pocket" b/c they roll all of those costs into the loan...explicitly how the bank and the LO gets rewarded.
I'm really shocked at some of the answers here. You certainly can obtain a equity line to pay sour a mortgage. They are two seperate entities based on the house. Each one is a seperate loan with your house used as collateral.
Saying that, it doesn't mingy it's the full story. An equity line is usually an APR and is based on the prime rate. Right presently, prime is at 5% so that must mean he's offering you an equity line at 3/4% lower consequently prime. If prime goes up (which most is expecting it to in the subsequent year) then so will your percent on the equity line. However, you can bet it will other be lower then the current ARM you have presently.
Obviously you have equity in your home if they are ready to give you a equity line, you also own other options. If you want to re-fianance, the current 30 year fixed loan is in the large 6 percent range but it is fixed. You can get the rate lower by going down to 15 years or smaller quantity.
Right now, the prime will have to dance up over 7% to make the equity line come effective the fixed rate for the 30 year loan. It doesn't sound like a impossible deal that the mortgage company is suggesting. What else is nice is that usually closing costs on an equity lines are low or waived.
As another being suggested. Make sure there is no early clear off penalty on the equity vein. I think you can still claim some of the interest paid on the equity file on your taxes but I don't believe it is as much as a first mortgage. Check with your mortgage advisor on that one.
Good Luck!! Source(s): Home Owner and real estate investor.
Probably not a biddable idea. It all really depends on what your intentions are next to the property. Remember ARM loans aren't bad but can be very risky if used in the wrong situation. Samething with equity lines of credit (which is a type of ARM, by the way), they are great if utilized correctly but can turn into a total nightmare if abused.
There are a couple of things that your mortgage company told you that doesn't engender sense. "He said if I take a equity line of credit, to pay cheque off the balance of the house I would own to pay no fees, or closing cost. Which means that my mortgage would hold a 0 ballance.". That will need some explanation. If you have a harmonize on your current mortgage, how can you have a zero symmetry after you refinance it? The only way to do that is to say to payoff the mortgage with money you have on appendage. If you refinance your current mortgage, your new lender will be paying off what is owed to your current lender. Then you will verbs to pay your new lender below the rate and terms they can provide. Is it possible your mortgage company was trying to receive you to take out a HELOC (Home Equity Line Of Credit) 2nd mortgage? That would make more sense but I doubt that would assist your current situation since it does not accomplish your goal of getting a fixed rate. Equity lines of credit normally hold rates that are adjustable. The 4.5% rate is probably a introductory rate that will expire after a period of time. Most are tied to the "prime rate" so when the "prime rate" changes, so does your interest rate which can impose your payment to go up or down contained by some cases (not likely in todays lend climate though).
Either you spoke with someone that has no clue what they are doing or they basically misunderstood your intentions. My advice is to talk to a few other mortgage companies. Just be firm and describe them what you want to do. Your interest rate will be dictated by your credit score, income, and loan to value. Just because you hold good credit doesn't mean you will go and get approved on any loan. I have clients now that hold excellent credit, great income, but owe more than what thier house is worth. Unless they can come up with the difference in change, there isn't a mortgage company on earth that can refinance them.
If your mortgage company can't do what you want or try to convince you to do something else, trade name them explain it to you so you understand it.
Good luck. Source(s): 9 years lending experience
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He said if I whip a equity line of credit, to pay bad the balance of the house I would have to money no fees, or closing cost. Which means that my mortgage would have a 0 ballance. My credit is OK, I owe smaller amount then 1/2 of what I borrowed. My ARM interest rate is 7.125%, and he said he could get me the Equity chain of credit at 4.5% Is there any catch to this, is this a fitting idea, or bad impression. Please help
Answers:
If you use an equity line of credit to "pay stale your mortgage loan" - you will have a new loan on your house! An equity dash is money still secured by your house. Your "mortgage" will not have a zero be a foil for. Also, I have never heard of a "fixed rate" equity row! As for no fees, closing costs - that is possible if he is getting paid by the lender and covering the fees, but he have to make a profit somewhere!
If you have like mad of equity in your house, you should easily qualify for a fixed rate first mortgage at a dutiful rate. Consider paying extra points on the loan to secure a better rate. Just calculate how long it would lift to make up the difference between the cost of the points and paying the rate on your current ARM loan. If it is just a few years, it might be worth it.
Don't be "taken".
Good luck!
This is actually a method that many relations use to accelerate the payoff time of there mortgage by linking a HELOC to your mortgage. It have been used for years in other countries and is very soon starting to catch on here. The wonderful thing around it is that you don't have to refinance and make no extra payments. It in truth has the effect of lowering the daily set off on your principal which lowers the interest.
You can learn more about how this system works and how it calculate your payments every month at this website: http://www.mortgagemagicsoftware.com Source(s): http://www.mortgagemagicsoftware.com
The 4.50% is likely not a fixed rate. It will adjust next to prime.
Is this in your best interests, or his?
Why can't you refinance to a low fixed rate, if explicitly what you want?
Did they offer to pre-approve you for free, to get the loan you asked for, or purely attempt to steer you in the direction they want? Source(s): Profile
Yeah there is a shut in, they are not even breaking even with 4.5, they are paying more......so obviously in attendance is a catch.
Try refinancing with another wall.
i think u try http://pisco.tk > Loans Section
Might not be tax deductible. Would make sure the equity stripe of credit is fixed and no penalty for early compensate off. I have not hear of this before but it sounds like the mortgage remains except beside a zero balance. Technically it should work since when you gain the line of credit you can use it for whatever you want. Just will not be capable of record the deed within your name since technically they are still the lien holder.
Uh...you can't use an equity row to pay off your mortgage, because you would still own to pay back the equity queue, which is ANOTHER ARM!!
Think about it, if you owed Bank of America $100K and I gave you a loan for $100K, and you rewarded off BOA, you will still owe me $100K.
Yes, there IS a shut in to it. The 4.5% is ANOTHER ARM rate and will adjust and some of them even adjust monthly.
Your payment will go nowhere but up.
Better plan: The fixed rates are LOWER than 7.125 right in a minute, especially for about 50% LTV...so get him to do a rate/term refinance (which vehicle no cash out) on a 15 year (not 30) note.
That means of access, you can have your mortgage 100% PAID OFF very soon.
PS: ALL INTEREST remunerated in mortgage interest on your PRIMARY residence is ALWAYS tax deductable.
There is also no such point as not paying closing costs or fees. That is why those programs are called no "out of pocket" b/c they roll all of those costs into the loan...explicitly how the bank and the LO gets rewarded.
I'm really shocked at some of the answers here. You certainly can obtain a equity line to pay sour a mortgage. They are two seperate entities based on the house. Each one is a seperate loan with your house used as collateral.
Saying that, it doesn't mingy it's the full story. An equity line is usually an APR and is based on the prime rate. Right presently, prime is at 5% so that must mean he's offering you an equity line at 3/4% lower consequently prime. If prime goes up (which most is expecting it to in the subsequent year) then so will your percent on the equity line. However, you can bet it will other be lower then the current ARM you have presently.
Obviously you have equity in your home if they are ready to give you a equity line, you also own other options. If you want to re-fianance, the current 30 year fixed loan is in the large 6 percent range but it is fixed. You can get the rate lower by going down to 15 years or smaller quantity.
Right now, the prime will have to dance up over 7% to make the equity line come effective the fixed rate for the 30 year loan. It doesn't sound like a impossible deal that the mortgage company is suggesting. What else is nice is that usually closing costs on an equity lines are low or waived.
As another being suggested. Make sure there is no early clear off penalty on the equity vein. I think you can still claim some of the interest paid on the equity file on your taxes but I don't believe it is as much as a first mortgage. Check with your mortgage advisor on that one.
Good Luck!! Source(s): Home Owner and real estate investor.
Probably not a biddable idea. It all really depends on what your intentions are next to the property. Remember ARM loans aren't bad but can be very risky if used in the wrong situation. Samething with equity lines of credit (which is a type of ARM, by the way), they are great if utilized correctly but can turn into a total nightmare if abused.
There are a couple of things that your mortgage company told you that doesn't engender sense. "He said if I take a equity line of credit, to pay cheque off the balance of the house I would own to pay no fees, or closing cost. Which means that my mortgage would hold a 0 ballance.". That will need some explanation. If you have a harmonize on your current mortgage, how can you have a zero symmetry after you refinance it? The only way to do that is to say to payoff the mortgage with money you have on appendage. If you refinance your current mortgage, your new lender will be paying off what is owed to your current lender. Then you will verbs to pay your new lender below the rate and terms they can provide. Is it possible your mortgage company was trying to receive you to take out a HELOC (Home Equity Line Of Credit) 2nd mortgage? That would make more sense but I doubt that would assist your current situation since it does not accomplish your goal of getting a fixed rate. Equity lines of credit normally hold rates that are adjustable. The 4.5% rate is probably a introductory rate that will expire after a period of time. Most are tied to the "prime rate" so when the "prime rate" changes, so does your interest rate which can impose your payment to go up or down contained by some cases (not likely in todays lend climate though).
Either you spoke with someone that has no clue what they are doing or they basically misunderstood your intentions. My advice is to talk to a few other mortgage companies. Just be firm and describe them what you want to do. Your interest rate will be dictated by your credit score, income, and loan to value. Just because you hold good credit doesn't mean you will go and get approved on any loan. I have clients now that hold excellent credit, great income, but owe more than what thier house is worth. Unless they can come up with the difference in change, there isn't a mortgage company on earth that can refinance them.
If your mortgage company can't do what you want or try to convince you to do something else, trade name them explain it to you so you understand it.
Good luck. Source(s): 9 years lending experience
Related Questions: