Amanda B asked:
My husband I are looking to borrow about $35 thousand dollars out of the equity of our home to help finance our son’s college and to do some small renovations. We bought our house ten years ago for $170 thousand. It was recently appraised at $320 thousand and we have payed our mortgage down to $130 thousand. We are wondering if it makes more sense to refinance and pull $35 thousand out or if it makes more sense to take out a home equity loan. We are looking for the option that raise our monthly mortgage payment (or loan payment) the least.
ELIAS
My husband I are looking to borrow about $35 thousand dollars out of the equity of our home to help finance our son’s college and to do some small renovations. We bought our house ten years ago for $170 thousand. It was recently appraised at $320 thousand and we have payed our mortgage down to $130 thousand. We are wondering if it makes more sense to refinance and pull $35 thousand out or if it makes more sense to take out a home equity loan. We are looking for the option that raise our monthly mortgage payment (or loan payment) the least.
ELIAS
RANDAL
refi would probably allow you to lower payment because you could extend length of loan. you may not want do that but it is possible.
home equity will have much smaller fees but interest rate will be higher.
STACY
With refinancing you will have to pay points and there are other costs associated with it. An equity loan usually only costs the amount of the appraisal. Unless of course you can get a lower interest rate than you have. There are a lot of variables in your question. Either way it is a tax deduction, and they have the new deductions for education too.
I really recommend that you talk with your lender, see what the interest rate is for refinancing and what points you will have to pay. It may be the best route. A lower rate will save you more in the long run, taking the equity, your payment may not increase at all. Talk with them.
KIM
IT ALL DEPENDS ON YOUR SCORES. IF LESS THAN 740 THEN YOU WILL HAVE SOME HITS TO THE RATE BUT SHOULD HAVE NO HITS TO THE RATE FOR THE CASH OUT WITH THAT LOW LOAN TO VALUE.
MERLIN
If you live in TX, keep them separate because TX does things differently.
Anywhere else though, look at the rate and payment of your current mortgage, figure out the payment of the new mortgage including the $35k cash out, and then consider the existing mortgage payment and the new home equity payment. Write it all out on paper and you’ll be able to see which is most advantageous to you. If the lowest payment is your primary concern, look mostly at the dollar amounts, but if the overall interest is a bigger concern, multiply all the payments by the terms and compare the final numbers.
Have you also considered student loans and work study? There are also grants to be had but it takes a little digging to find all the resources you might need. I managed to go to college with only one $4000 loan for the first year. After that, Pell grants and the grants from the school paid the tuition and I had a work study job to keep me afloat.
SHELDON
You have to crunch the #s. A equity line usually adjustable but has little or no fees. A re fi will have more fees and but right now you can probably get a good fixed rate.
If you can pay it back quickly the equity line MAY be better, if it will take some time the re fi is MAY be better. It will probably take less time for the equity line to get completed. Another benefit to the equity line is you only take what you need. If you only need a couple thousand a month of a few thousand a year you take it as you need it and only pay the interest on what you have used. If you re fi and take the complete 35k out now you will pay interest on the whole amount from day one.
You have allot of equity, you could do a equity line and if it seems it will take longer than you want and/or the interest rates goes up you can than re fi it all but you may not get the deal you could get know.