Using Home Equity To Pay Off Second Loan
REM # A636
By Ilyce R. Glink
Summary: A reader wants to use the equity they have on a house to pay off a trailer home on the same investment property. Ilyce thinks the reader could save a load of money with a home equity loan.
Q: I have a question about some investment property that my mom and I own.
We have a house and a trailer home on some land.
The house just got paid off but it seems like we’re not building up any equity on the trailer. We borrowed $30,000 on the trailer and are paying 9.5 percent interest.
Would it be wise to borrow the money on the house and pay off the trailer? What would be the best plan of action?
A: If you can take out a mortgage or home equity loan against your home to
pay off the trailer, you'll probably save a load of cash. If you have good credit,
you ought to be able to take a home equity loan for somewhere less than 6 percent.
That's a third less than what you're paying. You may even get a fixed rate home
equity loan for substantially less than you are paying on your current loan
on the trailer.
Let's look at how the numbers work. Right now, if you took out a 30-year mortgage
on your trailer at 9.5 percent interest, your monthly payment is $252.
If you take out a home equity loan for 6 percent for $30,000, and you wanted
to keep the same payment, you'd pay off the loan in 15 years, or half of what
it would take you at the 9.5 percent rate.
If you wanted to shorten the term of your loan, you could opt to pre-pay the
mortgage. You could pay off the loan in 10 years (if you pay $333 per month)
or 5 years (if you pay $580 per month).
Please talk to your local banker about what kind of home equity loans they offer.
Many banks don't even charge points or fees for a home equity loan, and they
offer a fixed rate of interest.
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.
Quit-Claim Deed Question
Quit Claim Deed Transfers Property Taxes
Deed in Lieu of Foreclosure Will Hurt Credit Rating
Tax Problems Should Lead To Payment Plan With IRS
Selling Land When You Can't Find One of the Owners
Link to This Article
Like what you've read? Spread the word! You can link to this article
from your website by copying the following code and adding it to
a page on your website:
Copyright ©2001-2007. ThinkGlink, Inc.
All rights reserved. Reproduction of material from any www.ThinkGlink.com pages without permission is strictly prohibited.
Site designed by Walker Sands Communications
