Home Equity Loans

Discussion in 'After Hours Lounge (Off Topic)' started by Chu Gai, May 10, 2006.

  1. Chu Gai

    Chu Gai Lead Actor

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    Lots of companies advertise on the tube...DiTech, ELoan, LendingTree, and so forth. Any experiences with any of them? Is it worth it to just apply to each and choose the one with the least out of pocket expense?
     
  2. Jay Taylor

    Jay Taylor Supporting Actor

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    Chu,

    I opened a home equity line of credit with my local credit union about two years ago to do a major home improvement project. Due to the amount of the loan they waived all fees.

    They offered several options and the one I chose would fix the interest rate any time you borrowed money from the account. At the time that amount was 4.95%. If I made payments without borrowing any more, the rate was locked at 4.95%. If I borrowed more it would lock in the entire loan at whatever the rate was for that date.

    I have since paid off the loan but have not closed it. That is because if I ever need another home improvement loan the line of credit will remain available for 10 years from the date that I started it, and give you up to an additional 7 years to pay it off.

    I really like having this type of loan because it is tax deductible. However I wouldn’t recommend it to someone who has a tendency to blow the money on non-essentials. After all, it does place a lien against your home.
     
  3. Chu Gai

    Chu Gai Lead Actor

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    Damn, I guess I can't use it to buy those super Transparent audio cables [​IMG] With respect to the fixed interest rate, are you saying that if interest rates were to change that you were locked into that particular intereste rate? IOW, it didn't vary at all?
     
  4. Jay Taylor

    Jay Taylor Supporting Actor

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    Yes. My credit union offered 3 different types of home equity loans.

    The first version was variable and changed the interest rate each month. At the time the rate was 4.75%.

    I chose the second version which only changed the rate when you borrowed more money from the account. That version was 4.95% at the time. Had I not borowed additional money, the rate would have remained at 4.95% until the loan was paid off. If I had made minimum payments, that would have taken 7 years. If I borrowed more money from the account at any time, the interest rate for the entire loan would have changed to the current rate for that date.

    The third version had a fixed rate for the life of the loan. I don't recall the rate but it was over 5% at the time.
     
  5. Mort Corey

    Mort Corey Supporting Actor

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    Basically, it's second mortgage. The on line lenders usually sell them off on the secondary market so you've got to keep on top of who to send $$ to until the dust settles. Your primary lender may be your best option as they won't have to re-underwrite the loan.......but if they're like my crummy bank they'll want to charge you for that anyway.

    Mort
     
  6. Jay Taylor

    Jay Taylor Supporting Actor

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    Which is another reason that I love Tinker Federal Credit Union. They keep almost 100% of the second mortgages that they make.

    I also like being able to make any sized payment using the telephone with or without a human on the other end of the line. Most of the payments I made were transfers from my checking account to the home equity line of credit account by using the telephone's keypad.

    Transfers may be made and balances checked on all of your checking, savings, and loan accounts via their automated entry system using your telephone keypad, 24-hours a day, every day of the year.
     
  7. Mark Philp

    Mark Philp Second Unit

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    Don't just apply to all of them, it will hurt your credit score. If you have too many inquiries they think you're trying to get multiple loans and it will drop your score. Personally, I'd try my bank or credit union first, sometimes they off very attractive "deals" to good customers.

    Good point somebody made about lenders selling your loan. We got our morgage through our credit union, even though the rate was a little higher because they don't sell off their loans. It's worth it, to me, to be able to pick up the phone and deal with a local office.
     
  8. DaveHo

    DaveHo Supporting Actor

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    I have an ING HELOC open at the moment. There were absolutely no fees of any kind incurred to open this. Unfortunately their current rate is rather high IMHO, but fortunately I've long since paid off the balance. I'm just keeping it open in case of an unforseen emergency.

    -Dave
     
  9. Todd Henry

    Todd Henry Second Unit

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    ING is not the only bank with no fee Home Equity Lines of Credits. I know that Bank of America also offers a no fee Home Equity Line of Credit.

    Also beaware of the difference between a Home Equity Loan and Line of Credit. With a loan, you get the money one time and then have a set period of time to pay it back with a typical fixed interest rate. Of course you can pay more than the minimum each month.

    With a Line of Credit you can borrow money at any time. So you could take out 2,000 today and then another 5,000 in 6 months. The interest rate is then on the total outstanding balance. Like Dave you can keep it open, usually for 15 years, to borrow against at any time even after you pay back the first loan without additional approvals. These typical have variable interest rates, typically prime + a margin. You can convert them into Fixed Rate loans as well for any current outstanding balance.

    Todd
     

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