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How To Talk Mortgage Talk

THE TRUTH ABOUT EQUITY LOANS

From Steiners Complete How To Talk Mortgage Talk
Book is available DIRECT 800-444-2524 Ext 1

Equity second - also called home equity line of credit (). more often extended by the lenders who do credit cards and car loans than those who do firsts, these loans are designed to let you tap the equity dollars in your home after you've owned it for awhile with a minimum of hassle.

Letters often arrive at your doorstep offering "no points", interest rates lower than most credit cards, and dollar amounts over 100% of your home's value.

If you need cash for a possible expenditure that you can repay fairly quickly, they may make more monetary sense than any other kind of revolving line of credit, because not only should the rate be better, but they are often tax deductible.

If you have a large necessary expenditure like replacing your roof, putting someone through college or large, ongoing health bills, which you cannot repay quickly, however, you can probably get a better deal with a second from the lender that made your first mortgage, or some other standard mortgage lender, who can do a fixed rate over an extended period of time, usually 15 or 20 years.

Trap: be aware that HELOC can have several pitfalls:

1. They may have fees that are not clearly disclosed on the application.
2. The introductory rate is often a teaser that disappears after six to nine months, and the "actual" rate used for the balance of the time you borrow the money can be as high as 21%. whatever the "actual" rate might be today, it will fluctuate because these loans are never a fixed rate. instead they vary from month to month with an underlying index.
3. The amortization schedule on equity seconds is usually short (five to seven years). this translates into a higher monthly payment than is standard for a home loan of the same amount. be sure to always check the actual dollar amounts of payments you'll have to make on the loan.  (See also book sections on seconds and seller carryback.)
(Copyright 1999 by C&S Steiner)

book is available DIRECT 800-444-2524 ext 1
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