General Credit Topics

[dog]

lets say i am looking to borrow 10-15 grand against a home that i own outright (don't plan to do this until next year when i am hopefully in the 700s), to finish up some remodeling.

can a person get a short-term fixed-rate mortgage, like 5 years or less, or am i looking at a heloc?  do lenders even do mortgages that small and short term? 

also, am i looking at fees and closing costs that would probably outweigh any benefit of a mortgage to a heloc?

perhaps this is not appropriate for this forum, but thought i could trust someone here better than someone elsewhere. 

[MidnightVoice]

I got a fixed rate HELOC, and though it was for 15 years there is no prepayment penalty, so it will be gone in 5 years at my current payment rate (unless I move house!)

[OneMortgageGuy]

I think a lot of people get the Heloc mixed up with a fixed 2nd. They are both seconds but a Heloc is a 25 year I/O and a Fixed 2nd is P/I or I/O and can be 5,10,20,15,20, and 30 Years.

Im just making up rates and I have no idea what you will get in a year...

Lets say you get a Heloc for 20K at a 8.25% 25 Years I/O... Your payment will be $137.50 I/O. You can pull out and put back as much or as many times as you need to. Your min payment on the balance is Interest/Only. To pay it off in 5 years you need to pay 407.93 and that if the interest does not go up. Rate will only go up when prime rate goes up.

Lets say you do a fixed second for 20K at a 8.25% 30 Years P/I... Your payment will be $150.25 P/I. You will get 20K and if you make a 10K payment you payment will still be $150.25 P/I. To pay it off in 5 years you will need to pay $407.93 just like the Heloc but the rate will never change.

For a Heloc shop around because lots of banks are well below prime rate. Keep in mind Heloc's have little fee and even no closing cost option.

A Fixed Second will have a higher rate and start at zero points but you can buy down the rate. That's up to you on points and not the bank! The closing cost on a fixed is higher. As for the term... Price out a all terms and see what rate is better but most of the time they are just about the same. If a fixed 30 or  year term is the same... I would take the 30 and make the 5 year payment but that's because the way I'm paid.

You really need to think how long you need to money for.

[OneMortgageGuy]

One more think.... You can find Heloc out there that have an option that you can lock in the rate but you can not pull any more cash out.

[dog]

thanks a lot, mortgage guy, you answered my question perfectly!

[OneMortgageGuy]

Glad I could help!

[Timothy]

Nice post.

TY

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OneMortgageGuy wrote:

I think a lot of people get the Heloc mixed up with a fixed 2nd. They are both seconds but a Heloc is a 25 year I/O and a Fixed 2nd is P/I or I/O and can be 5,10,20,15,20, and 30 Years.

Im just making up rates and I have no idea what you will get in a year...

Lets say you get a Heloc for 20K at a 8.25% 25 Years I/O... Your payment will be $137.50 I/O. You can pull out and put back as much or as many times as you need to. Your min payment on the balance is Interest/Only. To pay it off in 5 years you need to pay 407.93 and that if the interest does not go up. Rate will only go up when prime rate goes up.

Lets say you do a fixed second for 20K at a 8.25% 30 Years P/I... Your payment will be $150.25 P/I. You will get 20K and if you make a 10K payment you payment will still be $150.25 P/I. To pay it off in 5 years you will need to pay $407.93 just like the Heloc but the rate will never change.

For a Heloc shop around because lots of banks are well below prime rate. Keep in mind Heloc's have little fee and even no closing cost option.

A Fixed Second will have a higher rate and start at zero points but you can buy down the rate. That's up to you on points and not the bank! The closing cost on a fixed is higher. As for the term... Price out a all terms and see what rate is better but most of the time they are just about the same. If a fixed 30 or  year term is the same... I would take the 30 and make the 5 year payment but that's because the way I'm paid.

You really need to think how long you need to money for.

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[OneMortgageGuy]

Thanks Timothy