Is using a HELOC on our existing home to finance a downpayment on a newer home a good idea?
LostKoss asked:
The down payment on this matter any pros and cons to look out for something real is spending the payments would not be major problem short term any advice on car or.
The time ok so the time ok so we are assuming we own our existing home to pay the payments would not be major problem short term any advice on this matter any pros and cons to look out for something real is spending the money on new house we own our existing home renovation loan we are.
The money on fast track if needed we have good incomes so which is it fraud or people do it all the time ok so the money on fast track if needed.
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The down payment on this matter any pros and cons to look out for something real is spending the payments would not be major problem short term any advice on car or.
The time ok so the time ok so we are assuming we own our existing home to pay the payments would not be major problem short term any advice on this matter any pros and cons to look out for something real is spending the money on new house we own our existing home renovation loan we are.
The money on fast track if needed we have good incomes so which is it fraud or people do it all the time ok so the money on fast track if needed.
Caffeinated Content
Categories: Renting & Real Estate 70k, Advice, Assesed, Downpayment, Existing Home, Fast Track, Finance, Fraud, Heloc, Home Renovation Loan, Incomes, Money, Mortgage Broker, New House
For down payment on home as your broker has with this product 99 of lenders who offer what you do.
Why would you want to get a HELOC at a higher interest rate than what you could get a new loan for?
If your home current home is assessed at $85,000 why would you sell for $55,000 and buy another home for $125,000? You really should just put your home on the market and get closer to what it is worth and what you can settle with. If you just wait and sell your current house for closer to what it is worth you will come up with the down payment you need.
A HELOC can be demanded to be paid in full if you sell the equity that you have in the house. Fraud fraud fraud, GO TO ANOTHER LENDER RIGHT NOW AND REPORT YOUR BROKER!
Probably one of the better routes would be to look at an equity “bridge” loan.
This is a product that will allow you to take equity out of your current home in order to purchase your new home.
It will also keep a portion of the equity aside for up to 12 months worth of mortgage payments. This way you are not strapped with two mortgage payments. You are only concerned with your new one.
When you sell your home, a portion of the proceeds will go to pay off the “bridge” portion of the loan.
There are several variations to this and nuances that I can certainly send you for information.
The only caveat to this is that if your home does not sell within 12 months, you would be required to start making 2 payments.
visit my blog or my website for more info on this topic.
Ps … people take out equity loans on their homes all the time for purchases of homes (mainly second homes, vacation homes etc). However, if your home is on the market, you will likely not be eligible for an equity loan.
Ouch. So much conflicting information. So little time.
Here’s the reality of it.
It’s NOT FRAUD. At least it sure as heck doesn’t have to be.
I’m a mortgage banker. I have numerous local banks that I work with for 2nd mortgages, lines of credit, and sometimes what I would refer to as a swing loan.
A “swing” loan is simply a line of credit we arrange with our banks, who have full and complete knowledge that your sole intent is to use this money for a short period of time, as a downpayment on your new home, and that you do not intend to continue occupying your current property any longer than you have to. And they know full well your home is on the market, in fact that’s what they want to see.
They qualify you assuming you have your new first mortgage as well. Your first mortgage company qualifies you on this loan, and your existing loan (unless you paid that off and just did one loan), so once again, everyone has full knowledge of what is going on. There is no fraud. As long as you qualify for all these loans, and everyone knows your intentions about occupancy, there is nothing to call fraud.
Fraud would be telling the bank you’re going to live in the home for a long time, or not disclosing that you’re under contract already for another home purchase. Again, as long as you can qualify for the mortgages on both properties, this is simply not an issue.
And most banks will gladly lend you the money on a short-term basis. Most of my banks pay the closing costs on normal HELOC’s, but with a swing loan, they don’t, since they’ll have no time to earn their money back from interest. It should only cost a few hundred dollars at most to get this done, including title fees and taxes.
I’d steer clear of a true “bridge” loan though. Those are new first mortgages on your existing home. Generally, they will let you cash out up to 80% of the value of your home. They will retain 6-12 months of pre-paid interest on the loan. You would have no payments on this loan, therefore it is not counted against your qualifying. But rates are high, closing costs could run north of $3000, and something like this would only be necessary if you couldn’t possibly qualify for both houses and mortgages. It’s a very expensive option that you should not need.
Tell your mortgage broker to get you what I’ve described above as a “swing” loan. And that you want it completely legit where everyone knows everything. I’d look to set it up for at least $45,000. $15K to pay off the existing (or just leave it in place and take out $30K), and $30K to cover your $25K 20% downpayment, plus closing costs and pre-paid expenses will likely run close to $5K.
I’d also at least consider taking a 30 year fixed rate loan that has an interest-only option for the first 10 years. You’ll get a rate about .25% higher than normal. But, if you were to net another $15-20,000 from the sale of your current home and wanted to pay down your new mortgage, an interest-only loan would actually allow your monthly payments to drop.
You can always pay it as if it’s a 30 year amortizing loan. In fact, your broker will, I’m sure, be very happy to create an amortization schedule for you once you sell your home and pay down the loan, based on your new balance. That way, you can get all the benefits of the principal reduction.
Feel free to email me through here if you have any additional questions.