CAN SOMEONE EXPLAIN WHAT TAKING EQUITY OUT OF YOUR HOUSE MEANS
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Date: October 20th, 2016 7:26 PM Author: slap-happy state windowlicker
Yes, that cam be true. I was being more cynical given the term Home equity loan was used because a second mortgage had a bad social stigma.
"What are the differences between a second mortgage and a home equity loan?"
The terminology is confusing. A second mortgage is any loan that involves a second lien on the property. Some second mortgages are for a fixed dollar amount paid out at one time, in the same way as a first mortgage. As with firsts, such seconds may be fixed-rate or adjustable-rate.
The seeds of confusion were sown in the 1980s when second mortgages appeared that were structured as a line of credit rather than for a fixed dollar amount. Borrowers could draw up to some amount, when and as they pleased. These loans were called "home equity loans" or "home equity lines of credit", with the latter shortened to HELOC. They are always adjustable rate.
I now avoid the term "home equity loan" and use "HELOC" to refer to any mortgage loan structured as a line of credit. While most of these loans are second mortgages, some are first mortgages. If you own your house free and clear and you want a line of credit secured by a mortgage, that loan is a HELOC, even though it is a first mortgage. Similarly, if you use a HELOC to refinance your first mortgage, the HELOC becomes a first mortgage.
I avoid "home equity loan" because the term is now used to mean many different things. Some people in the marketplace use it as a synonym for second mortgage, while others use it as a synonym for HELOC. Regulators usually define it as a mortgage on a home that is used for some purpose other than to purchase the home. And the National Home Equity Mortgage Association defines it as a mortgage to a subprime borrower!
In terms of usage, a HELOC is most convenient when your cash needs are stretched out over time. A common example is a series of home improvements, one followed by another. College tuition payments is another.
Fixed-dollar seconds are best when you need all the money at one time. Many home purchasers take out such seconds to avoid mortgage insurance on the first mortgage.
When taking a fixed-dollar second, borrowers can select between fixed and adjustable rates, as they prefer. When taking a HELOC, they take an adjustable because all HELOCs are adjustable. However, some can be converted into a fixed-dollar second at the market rate prevailing on the second at the time.
(http://www.autoadmit.com/thread.php?thread_id=3393760&forum_id=2#31691926) |
Date: October 20th, 2016 7:15 PM Author: Useless Provocative Codepig
Purchase price of house is $1M. You have to put down 20% - so $200,000. Bank gives you a loan for $800,000, secured by the house. This is a so-called "loan-to-value" of 80%, as the bank's loan is 80% of the value of the house.
House appreciates to $2M. Now loan ($800,000) to value ($2,000,000) is 40%. The bank was fine with 80%, so you can borrow another $800,000 no problemo. (If you did, your LTV would rise back to 80%, the highest level most banks like to have absent rare circumstances.)
Interest paid on this loan is deductible up to $1 million if you are using it to purchase or improve a home or $100,000 if you are doing anything else with it.
(http://www.autoadmit.com/thread.php?thread_id=3393760&forum_id=2#31691816) |
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Date: October 20th, 2016 7:30 PM Author: Useless Provocative Codepig
Banks charge a 2-3% fee just for the balance transfer; once transferred, regular CC rates apply unless there is a promo like 12 months no interest. Then you are getting fucked with 14-19% interest rates.
as i've said throughout, interest on the HELOC is deductible. if you are a biglaw wage slave, that helps come tax time.
HELOC won't fuck up your credit score.
(http://www.autoadmit.com/thread.php?thread_id=3393760&forum_id=2#31691956) |
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Date: October 20th, 2016 7:39 PM Author: Buff sickened senate corn cake
it does not 'fuck up your credit', it will go down a few points per transfer
and you have a house anyway, you shouldnt need 810+ credit for anything
but i guess on the multiple year thing
(http://www.autoadmit.com/thread.php?thread_id=3393760&forum_id=2#31692026) |
Date: October 20th, 2016 7:22 PM Author: Buff sickened senate corn cake
borrow money from what you've paid into house
use it if the interest rate is lower than what you would otherwise get
for example, it may make sense to borrow it to pay off 8% student loans if you are borrowing at 4%, or to build shit, or whatever
just be aware that you are increasing the loan on your house (by reducing the equity you've already bought in)
(http://www.autoadmit.com/thread.php?thread_id=3393760&forum_id=2#31691891) |
Date: October 20th, 2016 7:23 PM Author: Misunderstood messiness
There was a great TV commercial from the heydays of the real estate bubble, which had a cartoon of a house. Under the house they showed some dollar bills glimmering. And the narrator said "there is money under your house - it is called equity" and talked about how whatever loan company could come remove the excess money from your house so you could use it to buy a car or vacation or do home improvements.
It was like equity was just oil bubbling under your house that you could come have mined.
(http://www.autoadmit.com/thread.php?thread_id=3393760&forum_id=2#31691896) |
Date: October 20th, 2016 7:26 PM Author: Dark cumskin
House is worth $1m.
You paid down 400K and you have mortgage outstanding of 600K so you own 40% of the house and bank owns 60%
Your share is your equity, the 400k or 40% of the house.
You develop drug and womanizing habit and need 100K asap so you go to bank and they give you another 100K for 10% of the house (this is called taking out 100k of equity). Now you own 300K or 30% of the house, original mortgage is still for 600K or 60% of the house, home equity loan is for 100k or 10% of the house. Bank owns 700K or 70% of your house now (could be two diff banks ofs).
(http://www.autoadmit.com/thread.php?thread_id=3393760&forum_id=2#31691925)
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Date: October 20th, 2016 7:50 PM Author: Dark cumskin
Depends on your current vs. future tax situation.
401(K) means u pay income tax upon withdrawal during retirement.
401(K) roth means you pay income tax when you earned it.
(http://www.autoadmit.com/thread.php?thread_id=3393760&forum_id=2#31692098) |
Date: October 20th, 2016 7:34 PM Author: Big Fantasy-prone Resort
Doesn't it also cover the situation where you are ahead in your repayments of principal and so the bank lets you redraw the excess repayments?
(http://www.autoadmit.com/thread.php?thread_id=3393760&forum_id=2#31691987)
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Date: October 20th, 2016 7:44 PM Author: Big Fantasy-prone Resort
Australian house loans are usually at a floating rate (its basically impossible to get a fixed rate for more than about 3 years) so while rates are very low right now (about 4.2%) there's no reason to assume they always will be and there are local tax advantages to paying off extra principal on the loan for your primary residence.
(http://www.autoadmit.com/thread.php?thread_id=3393760&forum_id=2#31692064)
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