Home Equity Loans – second mortgage

motormank asked:


My husband and I need to lower our monthly payments. We have no debt except a line of credit for $60,000 with the payment of $410 and two car loans both adding up to about $25,000 and the combined payment of $1050/mo. So, we are spending about $1400/month for these 3 things. If we got a loan for $110,000 and payed all these off, our payment at 6.6% would be around $700/month. Of course I would always pay more than that per month which would go to principle. Why isn’t this a good thing to do? I realize that getting a new car would add to our payments once again. So, that would not be smart. Other than that, is this a smart thing to do? It seems like it is, but then why don’t more people do this?

John

beach_babe972 asked:


does this sound good?

you can buy a house now, and have it payed in 5-6 years. you can buy your vacation house now, or retirement house, and rent it, and the rent will pay the mortgage. and it will apprechiate by the time you retire.

you can reverse the compounding interest on a 30 year loan. (average daily balance). just like banks will take your payments and pay the lower interest loans first. when you do a 30 year mortgage, the lender takes monthly payments after the interest coumpounds the most. so instead you can take out a HELOC (home equity line of credit) as a second mortgage, a credit line of 30,000 for example, and use it to pay $15,000 towards the principle. now you lowered the principle amount by 15,000. so the interest is less. then use your monthly income to pay down the HELOC. when the HELOC is back to 0, pay another 15,000 to the principle with the credit. and your paying down the principle a lot faster than if you just made monthly payments to the loan. and the first month on the HELOC after paying it back down to 0, is 0%. the balance has to go past 30 days to have finance charges. since your always paying it down every few months, you’ll always have 1 month with no interest.

if you only paid monthly payments, after the first 10-15 years on a 30 year loan, you barely paid anything to the principle becuase most of your monthly payments go to interest.
if you have a 500,000 loan for 30 years, your actually paying $1,000,000 after 30 years because of the interest on the average daily balance of the loan.

so with the HELOC, you lowering the principle amount way faster then you could just making monthly payments.

and since your renting your retirement house, theres still monthly payments to the loan from the renters.

then in 5-6 years you will have some apprechation, and most of the loan will be paid, and you can live in it almost free, or sell it and have $200,000-$300,000 tax free.

CHUCK

Michael K asked:


Last year, I was compelled to agree to an interest only equity home loan. I paid cash for my home 2 years prior, and owned the home without mortgage of any type. Now, I am paying off an “interest only” loan payment for 30 or more years, with out even touching any of the principle.
I have been getting dozens of calls from “RE-FI” who are dying to jump on board, but for the life of me, can’t see where they make the money on such a poor loan structure.
I have no income but a small investment dividend, coming to an end and lots of equity in property, both personal and real.
ReFi companies offer me lower monthly payments and other services to get me on board. Are they just happy to take on the interest only account? Or, is there something else I don’t know about.

STEVIE

toddrws asked:


I have a fixed rate 64000 line of credit at 7.57%. With the resent rate decrease the adjustable rate I can transfer it to is at 5.8%. Tuesday they may lower it .5 – 1% more. Would it be worth transfering it to adjustable rate. I would save around 100 a month on interest that I would apply to the principle. Also how long will the lower rates remain and would they increase it slowely so a person would be able to relock in at a lower rate?
right now I see a 1.77% difference. That might just up to 2.77% on Tuesday. I would save 145 a month. I would apply it to principle.

PABLO