Home equity loan
|Posted by: Tina Suratt Jul 5 2004, 08:59 PM
|I am trying to sell my home, it is paid off 100%, its valued at $255,000 . Im having a hard time selling it because the newer construction in the area is selling first. I want to buy another home and was thinking of borrowing against the equity in my present home so I can move now while still trying to sell this one. I am not familiar with what loans would be best for this type of problem. Theres so many different kinds, Im just not sure which one is the best. I want to buy the next time for cash, and put the rest in the bank. I intend to buy a home for around $125,000 so I’ll have enough left over to invest and save. Should I just wait it out and see if this home sells ? Im afraid it would be a mistake to try and cash out of this one since I dont fully understand the terms of the different types of loans available. Thank you.
|Posted by: loanuniverse Jul 6 2004, 08:46 AM
Comparing between different financing options is not that difficult. You need to know a couple of things.
1- How long are you going to need the money for?
2- What are the fees associated with the loan?
3- Are there any prepayment penalties associated with the loan?
4- What is the interest rate?
After that, it is a matter of finding out what your priorities are. If I were in your position, I would think that I needed the money for about 12-months, which should be enough marketing time to sell my current house. The question then becomes “what kind of financing would let me have access to the cheapest money for that year?”. I would stay away from conventional mortgages because of the closing fees. There just isn’t enough time between borrowing and full repayment to justify the fees.
On the other hand, borrowing money using a variable interest rate product does have some risks. If you can get a fixed-rate equity loan for ten-years, that should mitigate that risk.
The safest way would be to wait until the current house is sold. It does seem as if you don’t have a particular house that you are interested in buying right now, so I would use the time to get familiar with some lenders in your area and see what kind of products they have in terms of home equity loans. Remember that the home equity loan will be repaid with the sale of the current property so be careful with large prepayment penalties.
You need to get in touch with at least three lenders and ask them for information on their home-equity products. It is smart shopping. I am always surprised about people that are willing to spend two hours to get an item a couple of dollars cheaper, but that don’t shop around for a loan. Remember that 1% on a $125,000 loan is $1,250.