|land loan Posted by: Linda Jun 2 2003, 01:41 PM|
Looking for advice on purchasing land for investment purposes. I am currently a home owner with about 60K equity. We refinanced in Dec 02 and are currentyly at 5.75% I am trying to decide if I should use my equity to purchase a piece of property, do a second mortgage, or a lot loan. The options I have been given on lot loans vary from 3 years interest only to a 15 yr. option. We are not currently planning to build on the property.
One last note, I am looking at putting my house on the market in the next 6 months.
Suggestions on the best route for lot purchases?
Posted by: loanuniverse Jun 2 2003, 06:24 PM
If you have the opportunity of borrowing against the land, it might be more advantageous to do so and not having to refinance your house. Primarily because refinancing will most likely cost you money. You are looking to get the money at the cheapest price possible. Even if refinancing gets you money at a lower percentage rate, you have to account for other matters such as:
1- Closing costs.
2- Having to pay PMI Private Mortgage Insurance if the new money takes you over 80% loan to value or increasing the amount of time that it will take you to get out of paying PMI.
The type of loan you get depends on your personal cash flow and how much are you willing to sacrifice. My advice is get the longest possible terms and the best possible rate and make sure that there are no prepayment penalties. That way, you can put more money into equity at your own pace.
By the Way, I know what you mean about refinancing… I just refinanced in February and thought I had a great deal. If I had waited three months, I would have locked a much better rate.
Posted by: Linda Jun 4 2003, 03:44 PM
Thanks for the advice. I was leaning against pulling the cash out of a refi. When I read your post about PMI and closing costs, I was definitely against doing it.
Thanks for reminding me about the payoff penalties…. I need to ask that question to the lender.