Home Equity Loan
How much Can I take Out for Home Equity line of Credit?
I have a house paid for free and clear. How much will a lender allow me to take out on a Home Equity Line of Credit? My friend told me only 40% of the value of the home. Is that true?
Public Comments
- Depends on a lot of things, including your credit rating/score.
- No. You would be best taking out a full mortgage. You can write off the interest and it is much lower interest rates than a equity line.
- When the person here said you are taking a full mortgage, that is a common mistake. The major difference between a second mortgage and a traditional first mortgage is the indices they use to price them. Most 2nd mortgage companies use the fed rate. While a traditional first mortgage is based on Treasury Bills. Also, there is really no such thing as a first or second mortgage. When a mortgage is first or second is determined by the file date. If you were to take out a home equity line of credit or a fixed loan it would considered a first mortgage either way, because it is recorded as the only lien on the property. As far as LTV, you can borrow upto 125% of the value of the house, depending on what lending institution you use. Lastly, if you are 62 years old or older, consider a FHA reverse mortgage. FHA will give you approximately 50% of the value of the home, minus fees and you get to live in the home for as long as you live and not pay it back. Interest accrues on the balance owed and upon the death of you and your spouse, if any, the estate then can payoff the mortgage or give the house back to FHA. There are no credit qualifications or income requirements for you because you are not making payments on the home. I hope this helped.
- Equity lines are usually second mortgages and they are usually a higher interest rate than a first mortgage. If you have no mortgage now, then you'll be taking out a first mortgage. Those are fixed payments (or adjustable rate) over a fixed amount of time. You can always pay it off early or make large chunks of payments onto the principal. Equity lines are more flexible in the monthly payments, you can pay a minimum or more than the minimum, kind of like a credit card. First mortgages can be 100% of the house value, but you have to have excellent credit and you might have to pay for mortgage insurance. If you keep it 80% or less then you don't have to have perfect credit and you won't have to pay the mortgage insurance.
- lenders rent money; some will lend only 40%, others 100%, depending on many criteria; such as your length of time owning, rental prop or you occupy it, credit score, income etc.
- Here you go...YES, get a home equity line, most places are free,(free appraisals and closing fees) and interest rates are really good right now. Also tax deductible.(check with cpa).... Plus you have instant cash with your Equity. 40% is wrong, most banks will allow anywhere from 80 to 95% LTV (loan to value), and most important helocs are only charged with the amount you have against it. Why would you go get a full mortgage and pay interest all the time when you only pay when you need it. If anyone would like to learn how to use their home equity line to payoff their mortgage in as little as 1/2 to 1/3 the time. Please contact me with website below
