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What would be better a home equity loan or a mortgage?

I now have a home equity loan with 8.5% interest, for 26k. I don’t owe my house, the value of my house is around 100k. But now, I was looking on borrowing to pay off debt and have one single payment, with this same loan. Bank offers a mortgage for 5.875% interest for 50k with almost 4000 in closing cost. This loans are for 30 years both and fixed rates!! I don’t know which one to choose that would benefit me, more! Can you please help!!
the term “I don’t owe my house” Means I don’t have any first mortgage on my home.

Thanks for correcting me!

3 Comments

  1. Judy says:

    “I don’t owe my house”
    This statement is going to confuse the doohikies out of anyone that reads it.
    /

  2. gardenoflia says:

    Which is lower interest rate? Is interest rate lower than the interest on your (credit card??) debt? How much do you owe? Could yu debt-stacking for debt accelleration, and save yourself a ton of money on paying off this debt? Both are really a mortgage (lien against your house/loan against home you have to repay).
    If you refinance, you’re looking at another 30 or 15 year loan, and lots of interest. How much is that gonna cost you, including closing costs or points? Can you go to a different company for a loan? $4000 in closing costs on $50,000 sounds like a LOT!! But figure it out. Which one costs you less over time? Which one gets you out of total debt faster?
    Whats the fee for a HE Loan? How soon can you pay that off? You gotta crunch the numbers, and see which is better for you. No-one else can decide that for you. If you have an accountant, ask him/her. Don’t forget, your home-loan interest is tax deductible. How much will that save you off your taxes? Maybe you want to use more of your equity, to invest in real estate in your area? Depending on your area, is this a good idea? It really is a once-in-lifetime opportunity for many people out there who have the knowledge and money to invest. Check out all your options. Maybe you can borrow money from a relative or private person, pay off your high interest debt, and then pay them back over time, let’s say for 4% or what the average CD is paying.
    Hope you learned your math in school.

  3. Steven says:

    You will need to ask the bank for a cost verses benefit analysis between the two loans. On smaller loans like yours it’s often better to skip the fees and take the higher rate on a home equity loan.

    Loan guys are very busy these days and may not want to do this for you……….hopefully they will.

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