advice: bank telling me i need mortgage + home equity to close

[abc]

hmm theyve approved our loan for over a month, 550k, we find we need 564k, they say the cap is 550k, but they can give us a variable rate home equity loan of 14k at prime rate 4.0pct for 20yrs.

we said him 4.0pct, can we shift 50k out of the 550k mortgage, which is at 5.75pct, to this cheaper home equity, they said yes we can do this too....


Now... which way is better, 500k + 64k homeequity

or

550k + 14k homeequity


I did calculations, total monthly payments going either way is nearly the same, only about 11dollars difference between them.

The catch is after 30yrs, we would have paid about 32k more in pure interest in doing the 550k + 14k method.


The other catch is the variableness of the 4.0 prime rate on the HE loan... should i take only 14k or bring it up to 64k!?

 

[GtPrOjEcTX]

holy crap that's an expensive house.

 

[eakers]

Originally posted by: GtPrOjEcTX
holy crap that's an expensive house.

 

[StageLeft]

Originally posted by: eakers

Originally posted by: GtPrOjEcTX
holy crap that's an expensive house.

 

[Spencer278]

There is also that rip of insurance deal where you get to pay more until you get 20% into the house.

 

[StageLeft]

Originally posted by: Spencer278
There is also that rip of insurance deal where you get to pay more until you get 20% into the house.

Private Mortgage Insurance.

 

[Viper GTS]

Don't look at the payment amount.

That $1,000 a year could be spent on far better things than interest.

Viper GTS

 

[abc]

Originally posted by: GtPrOjEcTX
holy crap that's an expensive house.

 

[abc]

i know, it's insane, wasnt ready to buy a house but need one now... well i got the 20pct down, just didnt forsee that little extra 14k i need.

 

[abc]

Originally posted by: Viper GTS
Don't look at the payment amount.

That $1,000 a year could be spent on far better things than interest.

Viper GTS

viper what are you referring to... what i said about the diff. between the two scenarios is about 11bucks = about 1k a year?

i have to decide in a few hours, after the new mortgage rates are released...

 

[Viper GTS]

Originally posted by: abc

Originally posted by: Viper GTS
Don't look at the payment amount.

That $1,000 a year could be spent on far better things than interest.

Viper GTS

viper what are you referring to... what i said about the diff. between the two scenarios is about 11bucks = about 1k a year?

i have to decide in a few hours, after the new mortgage rates are released...

This is the important part:

The catch is after 30yrs, we would have paid about 32k more in pure interest in doing the 550k + 14k method.

That's over $1,000 per year.

Viper GTS

 

[slick230]

Originally posted by: abc
i know, it's insane, wasnt ready to buy a house but need one now

And you needed a $564K house?

 

[FeathersMcGraw]

Don't expect your home equity loan rate to stay at 4% for 20 years.

 

[abc]

yeah thats how prices are and i needed the location for my folks !

if i just needed a place for me i'd leave this area and get a single family for 350k and alot more acreage believe me.

fyi its a 700k+ house!

 

[abc]

Originally posted by: FeathersMcGraw
Don't expect your home equity loan rate to stay at 4% for 20 years.

yeah, i was contemplating that.... puting 75k into a variable gig.... for 20yrs.. not sure...

however, doing it this way i'm saving about 1k a year of interest over 30years...

(500k + 64k scenario) as opposed to the 550k + 14 one

 

[Viper GTS]

Originally posted by: FeathersMcGraw
Don't expect your home equity loan rate to stay at 4% for 20 years.

Ahh, and there may be the catch...

If it's not fixed at 4%, I wouldn't do it.

Viper GTS

 

[abc]

yeah we will ask why we werent offered fixed... its currently variable....


again the question is 14k or 64k... so at the least 14k, or shift 50k from mortage since it's 5.75 (jumbo) to the 4.0 HE.

 

[abc]

sigh , actually it's gonna be 25k or 75k.... not 14 or 64.

Need more for home improvements...

 

[GasX]

The home equity may be tax deductible which would make it the better bet. Keep in mind that unless you are putting down 20%, you will be paying PMI. If you take enough in the home equity loan to make your mortgage 80% of the purchase price - no PMI!

 

[EagleKeeper]

Originally posted by: Mwilding
The home equity may be tax deductible which would make it the better bet. Keep in mind that unless you are putting down 20%, you will be paying PMI. If you take enough in the home equity loan to make your mortgage 80% of the purchase price - no PMI!

save the cost of the PMI if possible.

Also, consider if the seller will either adjust the price, or take back a small second at %4.5

 

[abc]

Originally posted by: Mwilding
The home equity may be tax deductible which would make it the better bet. Keep in mind that unless you are putting down 20%, you will be paying PMI. If you take enough in the home equity loan to make your mortgage 80% of the purchase price - no PMI!

thanks... well i dont think i'm paying PMI... doing this HE loan is what is helping us avoid the PMI...

 

[abc]

again, i guess my question is whether it was worthwhile, since i am gonna do a HE loan either way... should i shift 50k out of the mortgage, and into the HE.... for any advantage.

 

[GasX]

Originally posted by: abc
again, i guess my question is whether it was worthwhile, since i am gonna do a HE loan either way... should i shift 50k out of the mortgage, and into the HE.... for any advantage.

with the HE, you permanently avoid PMI. You can always throw a little extra at it a month to get it down faster so that when the rate starts changing (invariably upwards) you wont take a big hit.

 

[DBL]

I'd keep the fixed rate and only use the HEL for the 14k. It floats with prime, so it won't be 4% for very long (most likely). Both interests are tax-deductible, so that is not an issue. Besides, if you want to gamble to get the lowest interest rate possible, you can do a 1/1 adjustable and your interest would be below prime (~3.6%), I believe. However, you would most likely be sorry later.

Also, saying you would save 30k over the life of the loan is very misleading, considering 1k in 30 years is going to translate into a LOT less buying power. IOW, you need to take into account inflation, not to mention that fact the chances of the loan averaging out to be 4% over 20 years is close to nil.

 

[Jzero]

You have 20% on $500k? Cripes, around here you could buy a pretty nice house outright with that, or a pretty extravagant house with a very low payment....