Can someone please explain me what would be the better choice
refinancing or home equity lona in getting money from my current home?
What are the tax advantages or disadvantages of these methods. What
would be the cheapest way to go with?
Thank you guys for your help.
Jan

In article . com,
"Jan" wrote:

Can someone please explain me what would be the better choice
refinancing or home equity lona in getting money from my current home?
What are the tax advantages or disadvantages of these methods. What
would be the cheapest way to go with?

It would take some numbers to start ballparking that question.
For example, the H/E loan is normally more expensive over time,
but cheap to get, while the refi is cheaper over time, but
expensive to get. If the H/E loan is small or for a short
term, it makes sense, but if you want a lot of money or plan
to keep the loan for more than a few years, the refi likely
makes more sense.

In general, the best answer is do neither. You should never
put your family home at risk. After all, that is your shelter,
something that is essential for life.

-john-

--
================================================== ====================
John A. Weeks III 952-432-2708
Newave Communications http://www.johnweeks.com
================================================== ====================

"Jan" wrote:

Can someone please explain me what would be the better choice
refinancing or home equity lona in getting money from my current home?
What are the tax advantages or disadvantages of these methods. What
would be the cheapest way to go with?

Home Equity line of credit loans can frequently be had at no cost, other than
the interest on any money you take out. They also are very flexible, often
issued with checks that you can write at will, so you don't need to know ahead
of time how much to refi for.

That makes them very dangerous though - if you start writing HE checks to cover
food, clothing or that Beemer you just have to have, you can quickly get into
trouble.

HELOCs are usually "interest only" loans, with the principle due when the house
is sold (but they can be paid off sooner).

The disadvantage is that HE loans usually float to market, or convert to a fixed
loan at a higher rate compared to a 30 year standard mortgage.

If its your primary house and you don't exceed some relatively high limits, the
tax implications are usually the same for either type of loan.

"Jan" writes:
Can someone please explain me what would be the better choice
refinancing or home equity lona in getting money from my current home?
What are the tax advantages or disadvantages of these methods. What
would be the cheapest way to go with?

Tax advantages null out. There's really no difference among the two
because, generally, all interest paid against loans on your primary
residence (first mortgage and home equity) are deductible.

If what you want is to cash out your equity, the answer lies in these
numbers:
the interest rate you have your current first mortgage at
(generally a fixed rate)

the interest rate you acan get home equity loan or line of
credit at (generally a variable rate)

what your crystal ball says about future mortgage rates, and
your tolerance for the risk that they are likely, historically
speaking to go up before they go back lower

how much cash you need, and for how long

how long you plan to be in your current residence

So, for example, say you have a short term need for a big chunk of
money, but you plan to stay in your house for several more years, and
have a nice 5.125% rate on your first mortgage. In that case, home
equity would generally be a better move here because if you were to
refi the first mortage, you'd be looking at a rate of more around 6%
that you'd be stuck with potentially for the rest of the time you're
in the home. And even if a home equity line was 7.25%, your need
for the cash is short term, so you're likely to pay less total
interest if you stick with your first mortage, and go with a home
equity line or loan for the short duration.


If however, you'll need the money for a long time, or if your current
mortgage rate isn't that hot, a cash out refi may make more sense.
It all comes down to your specific numbers.

Also, as others have pointed out, closing costs on afirst mortgage
are generally higher than for home equity, so be sure to add that
in, in addition to the "total interest paid" calculation.


--
Todd H.
http://www.toddh.net/

Todd H. wrote:
"Jan" writes:
Can someone please explain me what would be the better choice
refinancing or home equity lona in getting money from my current home?
What are the tax advantages or disadvantages of these methods. What
would be the cheapest way to go with?

Tax advantages null out. There's really no difference among the two
because, generally, all interest paid against loans on your primary
residence (first mortgage and home equity) are deductible.



It is not correct that all interest paid on loans on your primary
residence are deductible. A mortgage used to buy a property is fully
deductible up to $1mil. However, a home equity loan is only deductible
up to $100K above the original mortgage, as is money taken out of a
refi that is used for anything other than capital improvements. Also,
if he manages to get a home equity loan for more than the value of the
property, which some lenders, will do, the portion of the loan above
the property value is not deductible at all. Nor does the qualifier of
primary residence apply, as the mortgage/home equity deductibility is
the same for a second residence as well.









If what you want is to cash out your equity, the answer lies in these
numbers:
the interest rate you have your current first mortgage at
(generally a fixed rate)

the interest rate you acan get home equity loan or line of
credit at (generally a variable rate)

what your crystal ball says about future mortgage rates, and
your tolerance for the risk that they are likely, historically
speaking to go up before they go back lower

how much cash you need, and for how long

how long you plan to be in your current residence

So, for example, say you have a short term need for a big chunk of
money, but you plan to stay in your house for several more years, and
have a nice 5.125% rate on your first mortgage. In that case, home
equity would generally be a better move here because if you were to
refi the first mortage, you'd be looking at a rate of more around 6%
that you'd be stuck with potentially for the rest of the time you're
in the home. And even if a home equity line was 7.25%, your need
for the cash is short term, so you're likely to pay less total
interest if you stick with your first mortage, and go with a home
equity line or loan for the short duration.


If however, you'll need the money for a long time, or if your current
mortgage rate isn't that hot, a cash out refi may make more sense.
It all comes down to your specific numbers.

Also, as others have pointed out, closing costs on afirst mortgage
are generally higher than for home equity, so be sure to add that
in, in addition to the "total interest paid" calculation.


--
Todd H.
http://www.toddh.net/

I have to agree with what Todd H says here. Jan, you really need to
provide a little more data if you want some good feedback on your
specific situation.

Here are some questions for you:

1. What is the value of your home?
2. What is the balance on your current mortgage?
3. What is the rate on your current mortgage?
4. How much are you looking to pull out?
5. How quickly will you pay it back?

In general, where rates seem to be heading up and most equity lines are
tied to prime, I would lean towards refinancing your current mortgage
(unless your rate is really low) or possibly taking a fixed second
mortgage. But again, we really need more information on this one.