Yikes - I need some imput soon between 2 options

winker58December 1, 2005

I need to take out a home equity loan to consolidate debts and pay off a HELOC that is not fixed rate with interested only payments. Here are the two choices:

1) Home equity loan for $74,000 @ 8% with $2,800 fees (fixed rate) and giving us $2,500 in cash back and amortized over 30 years and due in 15 for about $537 a month.

2) Home equity loan for $75,000 @ 7.5% with no fees (fixed rate) and giving us $5,000 in cash back and amortized over 30 years BUT due in 5 years at about the same monthly payment as above.

Would you be concerned about the due and owing in five years and that we would have to refinance that loan?? Any other thoughts??? I have to decide fairly soon.

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joyfulguy

Is this a second or third mortgage?

Unless you have some major financial encumbrances now, shouldn't you be able to find such a loan at a lower rate?

ole joyful

    Bookmark   December 2, 2005 at 4:12PM
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winker58

With interest rates rising and home equity loans at a high percent than mortgages, that is the best we can do.

Now Option 2 above can be turned into a 25 year loan which is amortized over 30 years for 7.87% with only some minor recording fees and what not.

So now I am wondering if 5, 10, 15 or 25 years is a better bet.

    Bookmark   December 2, 2005 at 7:55PM
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cowboyind

If the interest rate is the same, take the longest payback time you can get. Then you do not saddle yourself with such a high payment. You can always pay more each month, but if you have a month when you are short of money, it's nice not to be obligated to pay so much.

With the additional terms, option 2 sounds like it's better, so unless there's something I'm missing, picking that one would be a no brainer.

What are you going to do with the $5,000 cash back? I wouldn't take that unless you really need it to pay off other debt so you can reduce your monthly payments.

    Bookmark   December 3, 2005 at 12:59AM
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