YAHT: Question about home equity lines of credit

[Spike]

I keep hearing these advertisements for home equity lines of credit that are 50, 60, or 70k at 2.99 or 3.99% interest. I currently have two mortgates on my house as we had to do an 80/20 loan. The 20% loan is roughly 70k and it is a fixed 30-year at almost 8%. The remaining 80% is a 5/1 ARM at 5.25%.

Can I take out a home-equity line of credit for 50, 60k, or 70k and put that towards my smaller loan, get that paid off, and be paying a lower interest rate? I can't seem to find the fine print that says I can't, so this seems to be a solution...

While my 5/1 has a 3 year prepay penalty the 20% loan has no such stipulation, so that is not really a consideration. Anyone have any experience doing this and is it possible? Thanks!

-spike

 

[labgeek]

Unless your home has considerably gone up in value, it doesn't sound like you have much equity in your home to take out a home equity line of credit.

 

[CTrain]

Originally posted by: labgeek
Unless your home has considerably gone up in value, it doesn't sound like you have much equity in your home to take out a home equity line of credit.

Yeah exactly.
Don't forget all the fees that you have to pay to refinance and such.

 

[Engineer]

The 3.99, more than likely, isn't a fixed rate. 2nd, is it confirmed that it's not an introductory rate?

The average for fixed rate seems be be rising and about 7.16% (Yahoo). I thouht about doing what you are talking about but, when the nuts and bolts were revealed, it wasn't quite as appealing.

YMMV and good luck.

 

[Spike]

Originally posted by: Engineer
The 3.99, more than likely, isn't a fixed rate. 2nd, is it confirmed that it's not an introductory rate?

The average for fixed rate seems be be rising and about 7.16% (Yahoo). I thouht about doing what you are talking about but, when the nuts and bolts were revealed, it wasn't quite as appealing.

YMMV and good luck.

I was thinking there had to be a catch. I will look into it some more to find out what all the fees and rates are.

As for equity, We have only had the home for a few months but house values in our area continue to sky-rocket (18% increase last year, in line for that again this year). Our home has all-ready increased in value but not by a whole lot yet.

-spike

 

[dirtboy]

You can do that, but wait until rates start rising... between your ARM and the variable 2nd, you're going to be hammered... unless you make enough money to cover the risings costs of your property.

 

[CTrain]

Originally posted by: Spike

Originally posted by: Engineer
The 3.99, more than likely, isn't a fixed rate. 2nd, is it confirmed that it's not an introductory rate?

The average for fixed rate seems be be rising and about 7.16% (Yahoo). I thouht about doing what you are talking about but, when the nuts and bolts were revealed, it wasn't quite as appealing.

YMMV and good luck.

I was thinking there had to be a catch. I will look into it some more to find out what all the fees and rates are.

As for equity, We have only had the home for a few months but house values in our area continue to sky-rocket (18% increase last year, in line for that again this year). Our home has all-ready increased in value but not by a whole lot yet.

-spike

Well, exactly.
If your home hasn't gone up much, where are you going to get 50k, 60, line of credit ???

From what was posted, you used a 80/20 which mean you had to borrow money to make the 20% down payment so in essence, you have little to NO equity in the house right now.

 

[Spike]

Originally posted by: dirtboy
You can do that, but wait until rates start rising... between your ARM and the variable 2nd, you're going to be hammered... unless you make enough money to cover the risings costs of your property.

I assume you mean if I went for the equity line I would be hammered as that could be a variable where as my current 2nd mortgage is a fixed.

I will probably just wait and refinance in three years as planned. I will take it up the butt in the higher interest rate but we did what we had to to get in a house at the time. I am thinking I should have gone for the 6.5% 30-year fixed when I had the chance but the payments where just so freaking high...

-spike

 

[labgeek]

What is a HELOC?

It's interesting reading... I was going to quote a few parts of it, but instead just suggest you go read the whole thing.