Home Equity Loan Decision
REM # AF59
By Ilyce R. Glink
Summary: If you own two homes and want to take out a home equity loan, how do you decide which home to take the loan on? Ilyce Glink offers some excellent personal finance advice to a couple that owns two homes, one in Georgia and one in Florida.
Q: We have a home in Georgia and another in Florida. We’re planning to sell our Georgia home (which is our primary residence) and move to the Florida home and make that one our new primary residence.
But we need to do some work on the Georgia home before we sell it. We want to use a home equity line to finance the work. Should we take out the loan against the Georgia house or the Florida house?
In addition, we have an adjustable rate mortgage on the Florida house. Should we refinance the Florida house, pull out equity for the Georgia repairs and lock in a fixed rate on the Florida house?
Thanks for your advice.
A: Since you're planning to sell the Georgia residence to move to your Florida home, you're better off taking out a home equity loan against the Georgia residence, which is currently your primary residence.
This way, when you sell the house in Georgia, you will pay off the loan.
As for your adjustable rate mortgage on your Florida residence, I don't have a problem with you keeping that loan, provided it's at a favorable interest rate.
Are you planning to pay down more of that loan with the proceeds of your Georgia residence? Once you figure out how much cash you’ll get from the sale of the Georgia residence, you can think about using it to pay down the Florida loan or making another investment.
You may want to sit down with a mortgage professional to discuss your options and determine whether you should refinance the Florida home and later pay it down with the proceeds of the sale of the Georgia home. You have many options and many of them depend on you’re current interest rate on your loans and how long you plan to live in the Florida home.
NOTE: This column is distributed by Real Estate Matters Syndicate, PO Box 366, Glencoe, Illinois, 60022. This column may not be resold, reprinted, resyndicated or redistributed without written permission from the publisher.
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