Home Equity Loans (HELOCs) Home Equity Lines of Credit Bad Credit Mortgages non-conforming FHA Mortgages Mortgage Interest Rates Home Equity Loans First-Time Homebuyers For Sale By Owner FSBO Mortgages Mortgage PreQualification Lette
Home Equity Loans come in two basic flavors--Home Equity Lines of Credit (HELOCs) and lump sum "cash out" mortgages. While HELOCs can be valuable at specific times, there are often equally compelling reasons to opt for cash-out instead.
When it comes to freeing up home equity for clients, I always take a look a the "bigger picture" to make sure we are doing the right things for the right reasons.
Here's a summary of the features and benefits of the two different products:
| HELOCs |
Lump Sum Cash Out |
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Almost always adjustable rate
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Valuable when used to negate PMI*
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Like a checking account, it is easy to spend the money up to the loan limit
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Must be managed when refinancing, may incur fees to keep credit line open
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Borrowers usually must send two separate payments every month
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Normally, extra cost to open and sometimes to close account |
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Usually comes from a fixed rate mortgage
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Easier approvals to higher loan amounts
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After you take the loan, all you can do is pay it back with the rest of your mortgage
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Balance can be refinanced easily as it is part of a single mortgage
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Because there is only one loan, borrowers make only a single payment
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No extra fees as the money is a part of the first mortgage |
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* PMI is private mortgage insurance imposed on borrowers who have less than a 20% ownership interest in their homes. |
HELOCs are often used as "bridge loans" whereby a home owner borrower money from an existing home's equity to place as a down payment on a home that has yet to be purchased. I have almost always found ways to avoid the expense and hassle of this loan configuration.
To best determine what course of action makes the best sense for you, we should talk for a few minutes. You will find me very accessible.
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If you need help determining the best way to access your home's equity, I can help. Contact me Via Text or Via Internet |
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