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10-10-2005, 01:36 PM
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#1 |
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Registered User
Join Date: Jun 2001
Location: New England
Posts: 13
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Home Equity Line of Credit
When I purchased my house back in March of this year, I did an 80/20 split. The 20% is in the form of a $50,000 home equity of line of credit. When I got approved for it, the interest rate was 6%. Since then it has steadily increased each month and currently resides at 7.25% as of my last bill.
I would like to try and refinance this, however when I went to my local credit union, they told me they would only finance up to 80% minus what I owe on the house. I asked them if I could roll both the mortgage and home equity line of credit into one fixed rate 30-year mortgage. They said I could, but that I would have to pay PMI. Why would I have to pay PMI? What would be the best way of lowering the home equity line of credit? If I get a sizable tax refund at the end of the year, should I put it towards the home equity line of credit, or to improvements/upgrades in the house? Last edited by Rob : 10-10-2005 at 01:39 PM. Reason: thread title correction |
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10-11-2005, 01:22 PM
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#2 |
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Registered User
Join Date: Jun 2005
Posts: 21
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Rob,
You have to pay PMI anytime you have a loan that is more than 80% the value of the home. I would take a look at see how much your house has appreciated. I know some areas back there have realized quite a bit of appreciation. In order to put your first and second together, I would see if you house would appraise for $310,000-315,000. If if appraised for this much then you could roll both together and avoid paying PMI. Another option is to find a lender that will do one loan with no PMI. I know of a couple lenders that will do that, but you get stuck with a nasty five year prepayment penalty, but if you know you're not going anywhere in the next five years then it wouldn't be a problem. |
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10-16-2005, 06:49 PM
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#3 |
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Registered User
Join Date: Sep 2005
Posts: 8
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Is your first mortgage Interest Only? Are the payments becoming uncomfortable? Here's why I ask. The difference between 6% and 7.25%
50,000 * 6% = 3000 / 12 = 250 per month. 50,000 * 7.25% = 3625 / 12 = 302 per month. That's a difference of only 52 buck a month! Prime+.500 is a great rate on an 80/20 second!! Even with 700+ ficos, you're usually going to be paying Prime+2.00. If the has appreciated enough, you could refi, and cut the 2nd payment down. Though since rates have been going up, you really need to look at the WHOLE picture before you make a decision. 1.25% isn't a big deal on your heloc, but .500% increase on your 1st would be. If the payments aren't uncomfortable, payoff any consumer debt > 7.25% first, then start working on your heloc. |
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12-11-2005, 05:31 PM
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#4 |
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Registered User
Join Date: Dec 2005
Posts: 1
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Rob...
The FTC wrote an article on home equity line of credit and they list some great resources that would probably answer your question best. If you haven't done anything yet, I'd check it out. |
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