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2kids2cats
My babies
Member since 6/05 5229 total posts
Name: f
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Home Equity Loan question
Just out of curiosity - DH and I were talking about how a lot of our friends bought a house and immediately took out a home equity loan and are doing major construction.
What is the benefit of a home equity loan? What are the rates like? How do they work? Why do so many people take them out? We have been doing the "tax return for the bathroom, etc." approach. Just wondering, thanks!
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Posted 11/23/07 7:56 AM |
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mrsjpierre
LIF Infant
Member since 10/07 263 total posts
Name: cindy
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Re: Home Equity Loan question
ur friends should really wait a couple of years b4 taking home equity loans.... you gotta give some time to build the equity.....thay say once u purchase the home you've already built about 20-40 grand of equity.....which is good. ppl use that equity loan for a lot of things my friend took an equity loan for 100k and paid off all her cc bills, car notes, student loan and the remaining she made some renovations ie..windows, furniture, kitchen remodel. it was wiser to just pay one monthly bill a month600/mos + mortg. instead of paying all these high interest rates on all cc, student loans, car loans.....we brought our house 7mos ago and eventually thats what i want to do!
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Posted 11/23/07 9:13 AM |
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MegZee
My bunny
Member since 5/06 8777 total posts
Name: Meaghan
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Re: Home Equity Loan question
The interest you pay on a HELOC (just like your mortgage) is tax deductable.
While I would get one to do major construction, I wouldnt do one to pay off CCs or a Car, because you are using your HOME as collateral for a CC, if you cant pay your HELOC, they can take your home. If you don't pay off your CC, they can't take your home, KWIM?
we are also taking the same approach as you - we pay with renovation with either our CC (at 0%!) or with extra $$
Message edited 11/23/2007 9:17:27 AM.
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Posted 11/23/07 9:16 AM |
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mrsjpierre
LIF Infant
Member since 10/07 263 total posts
Name: cindy
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Re: Home Equity Loan question
wow i didn't think of that.......you learn something new everyday! thnx
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Posted 11/23/07 9:21 AM |
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2kids2cats
My babies
Member since 6/05 5229 total posts
Name: f
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Re: Home Equity Loan question
Thanks. What are the interest rates like for a home equity loan? Our renovations seem so far away with our tax return use approach but we'll get there at some point. I'm guessing when we front dormer our house, then we'll take out a home equity loan. In a million years....
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Posted 11/23/07 10:00 AM |
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hazeleyes33
LIF Adult
Member since 5/05 13060 total posts
Name: Ginger
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Re: Home Equity Loan question
Posted by Meaghan729
The interest you pay on a HELOC (just like your mortgage) is tax deductable.
While I would get one to do major construction, I wouldnt do one to pay off CCs or a Car, because you are using your HOME as collateral for a CC, if you cant pay your HELOC, they can take your home. If you don't pay off your CC, they can't take your home, KWIM?
we are also taking the same approach as you - we pay with renovation with either our CC (at 0%!) or with extra $$
We took out a heloc to pay off cc's because the interest rates were too high and we are paying less than half per month than we were with the cc's. While I understand the concept, even if you take out the heloc to do home loans, if you can't pay it, you can't pay it and they will take your home anyway.
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Posted 11/23/07 1:05 PM |
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csorisi
My 2 LOVES
Member since 11/05 1984 total posts
Name: Corinne
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Re: Home Equity Loan question
We have a home equity loan fixed at 6.74%. I think the going rate now is closer to 7%. We had a HELOC for our 2nd mortgage and the interest only was killing us so we ended up paying less when we took out the home equity loan--we also took out more money then we originally took out with our 2nd so that we could do some major renovations and now I pay more off a month then I was when we first bought the house.
Except for the major renovation we are doing the bonus/tax return approach to do the rest of our renovations--we are taking it one step at a time and hopefully we will eventually get it done. We also put away more a month then our "monthly" taxes so that at the end of the year we have a few extra dollars to do other renovations.
Also there are two types of Home Equity Loans---a HELOC is a line of credit similiar to a credit card in the sense that you only borrow what you need and tend to be a little higher of an interest rate. A home equity loan is where you tell them you want a certain amount of money and you get the money all up front and tend to be fixed rates athough I have seen fixed rate HELOCs. Some peopel say that it is wiser to take a HELOC because you only take what you need but if you budget correctly and have money to do the work if you go over it might be better to take a home equity loan--it is really your own personal preference. Good luck!
Message edited 11/23/2007 3:48:40 PM.
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Posted 11/23/07 3:46 PM |
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