Author Topic: Home equity loan advice  (Read 2583 times)

kelmbabe

  • 5 O'Clock Shadow
  • *
  • Posts: 3
Home equity loan advice
« on: October 16, 2014, 07:14:40 PM »
Wife and I are looking to borrow against the equity in our home.  We own our home and have been mortgage free for almost 2 years.  Home should have a value of 350K+. 

We are looking to do some additional renovations on our home and finish our dock and seawall.  Would borrow $50K max.  Would use all of the money we need to renovate within the next 6 months.  Each of our credit scores should be above 760. Both currently working and plan to do so for many years to come.   We have never borrowed against our equity and not sure what our best option is.  Working with a couple local credit unions.  Below is some information I received today.  Not sure what our best option is and would welcome your input.   

Spoke to 2 credit unions today.   One sent me the following information. 

1. 10 yr. fixed mortgage which as of today had a rate of 2.75% and 1 pt.   

2.  Flex equity line of credit which is up to 100% LTV with a 1% minimum payment each month. Letís say you have a $50,000 line of credit and you only advance $25,000 then your minimum payment is $250 and that will decrease each month as you pay on the loan. The payment is both principal and interest. The rate can be anywhere from prime  -.25% up to prime + 3% with a FLOOR rate of 4%
 
3.  Interest only equity line of credit up to 90% LTV. The minimum payment is the interest that is owed on the loan. Letís say you withdraw $25,000 from your line of credit then a rough estimate on your payment would be $82. You have to have a custom score of 760+ in order to qualify for this product. The rate can be anywhere from prime up to prime +.50% with a FLOOR rate of 4%

Thank you in advance for your time and advice. 

Brad


Argyle

  • Pencil Stache
  • ****
  • Posts: 909
Re: Home equity loan advice
« Reply #1 on: October 17, 2014, 02:24:32 AM »
If you can afford to pay off the loan over time, why not put the same amount of money in a renovation account every month, and when you have enough, then do the renovations?  Is it worth paying the extra premiums to have them done sooner?

Cheddar Stacker

  • Magnum Stache
  • ******
  • Posts: 3714
  • Age: 41
  • Location: USA
Re: Home equity loan advice
« Reply #2 on: October 17, 2014, 12:02:56 PM »
I'd go with #1 and never look back. It seems like the clear winner to me.

tweezers

  • Stubble
  • **
  • Posts: 189
Re: Home equity loan advice
« Reply #3 on: October 17, 2014, 12:44:18 PM »
How long do you plan on carrying the debt?  If you can pay it off relatively quickly, a credit card with a zero interest promotional period might be a good option.

Example: We bought our house knowing it needed major renovations.  We had a rehab-loan that rolled into a mortgage for the bulk of it, but in order to keep the final mortgage amount lower we applied for a credit card with zero interest for the first 18 months.  It had a credit limit of $20K, and my husband applied a second card shortly thereafter.  We put $37K in renovation and household expenses on the cards and had saved almost the full amount before the 0-interest period was up.  We put the remaining balance (~$4K) on a line of credit with a much lower rate (5%, I think?) and paid that off within two months.

So, interest-free loan for 18 months + interest earned on savings + lower mortgage amount= win + win + win

kelmbabe

  • 5 O'Clock Shadow
  • *
  • Posts: 3
Re: Home equity loan advice
« Reply #4 on: October 20, 2014, 04:01:33 PM »
Appreciate the replies.

We want to do repairs now.  I would repay the loan of in half the time most likely. 10 year $52500 loan is at 2.875 today with a pt.

Is there any reason to consider the other two options.  Wife an I will spend close to the entire loan amount to finish.  Whatever we do not use will go back to the principal.

Hotstreak

  • Pencil Stache
  • ****
  • Posts: 776
Re: Home equity loan advice
« Reply #5 on: October 20, 2014, 04:32:46 PM »
I'd go with #1 and never look back. It seems like the clear winner to me.

+1 to this.

sirdoug007

  • Pencil Stache
  • ****
  • Posts: 587
  • Age: 39
  • Location: Houston, TX
Re: Home equity loan advice
« Reply #6 on: October 20, 2014, 06:22:14 PM »
Check out the rates at penfed.org


Sent from my iPhone using Tapatalk