Help with a New Loan Please :)
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TV ClubHouse: Archive: Help with a New Loan Please :)

Vixeninvegas

Friday, November 14, 2003 - 11:07 am EditMoveDeleteIP
Hi all - I'm in the process of trying to secure a new loan for a longer term and a lower interest rate. Since I know how smart you all are in here I thought I would ask for some input.

My current loan is at 7.24% & has a 5 year term on it but the payments are about to pull me under.

When I contacted my bank on Wednesday the loan officer suggested a "line of credit" that would start @ 2.99%APR Fixed rate for 6 months then go to prime + 0% thereafter. From what I understand the current prime is 4%.

The part that is making me queasy (sp??) (hehe besides the fact that I'm a terrible speller) is that in the small print it says "As of 9/1/03 the variable APR for lines of credit is 4% to 7% - there is a floor rate of 3.99% APR. The rate will not exeed 25%APR.

WTF??? 25% APR??? LOL is this normal?

Also I am not sure I understand the difference between the "line of credit" type loan (which she swears has a 10 year term) or a typical regular loan.

She also stated that the fixed loans they have available right now are @ 6.24%.

I'm so afraid to tie myself into something & don't really have a Signaficant other to help with this big decision.

OMG I have a headache - gotta stop thinking now LOL

Thanks so much in advance for any input.

Mware

Friday, November 14, 2003 - 11:21 am EditMoveDeleteIP
Vixen - Are we talking about a mortgage loan? A home equity loan? I'd need a little more info about what you're trying to do before I can be much help.

With regard to the 25% APR, that's high, you're right, but with a most home equity lines of credit, there is no rate cap other than that which the state or federal government may place on it.

I'd be able to be more help if I knew more about what you're trying to do.

Vixeninvegas

Friday, November 14, 2003 - 11:56 am EditMoveDeleteIP
Oh sorry - the loan is secured with my condo. Its paid in full I don't have a mortgage on it.

I'm trying to pay off all my small bills, along with lowering the interest on my current loan where I did this same darn thing but didn't cut up the credit cards LOL.

Would this be called a home equity loan?

Thanks for the help.

Mware

Friday, November 14, 2003 - 12:16 pm EditMoveDeleteIP
I think that if you plan on living in the condo for more than, say 3 years, and the closing costs are the same on the line of credit (adjustable rate) and the fixed rate at 6.25%, I'd rather have the fixed. The prime rate is at or near a historical low right now, and while nobody knows when it's going to go up, pretty much everyone agrees that it will.

By the way, with a home equity line of credit, the way it usually works is that the lender will approve a credit line for you for a specific dollar amount, and give you a checkbook which allows you to access that line of credit. Each time you want to access the line, you simply write a check. Each month, they'll send you a statement showing the activity on the line, and asking you to pay at least the interest on the amount you borrowed. You may pay more than just the interest if you wish, but you don't have to. If you do pay more than just the interest, the extra amount you pay goes to the principal, and that amount becomes available for you to borrow again.

At the end of a certain period, say 10 years, for example, they terminate the borrowing privileges. At that time, you begin paying back principal and interest over another period (maybe 5, 10, or 15 years).

With the fixed rate loan, you're borrowing a specific amount at a specific interest rate, over a specific fixed period of time.

Tabbyking

Friday, November 14, 2003 - 12:26 pm EditMoveDeleteIP
you could 'refinance' and get some of the equity out of your condo. that would make your interest tax deductible in most states, too, because that equity amount would be part of your mortgage.
if you can get an interest rate at least 1 full point lower than what you have, it would probably be worth it. there is usually an appraisal (or 'comps' done on similar dwellings.) often, the closing costs will be put back into the mortgage, too. (don't pay points, though, if you can avoid that. sure, it may lower your interest by half a percent, but could cost a couple of thousand dollars to do that. unless you are your place for many years to come, it won't come out even to get lower interest.)
we have the home equity line for son's college costs. right now, it's at 4% but it could literally go to the cap of 18% 'overnight'. while i don't see that happening, it's a little scary! you also put your home 'on the line'.
we only owe the interest each month, which is maybe 7 or 8 dollars, but i have been sending as much as i can. seems i send 500, then need a thousand...pay a thousand, need two-thousand:)
but that's my life! if i found a quarter in the street, i would owe a dollar to someone. if i find a 100-dollar error in my favor in my check book, i need 600 dollars for new tires. you get the picture!

Tabbyking

Friday, November 14, 2003 - 12:30 pm EditMoveDeleteIP
we just changed our '7 year fixed to adjustable' rate to a 30-year fixed at 5.5% and it cost us 900 dollars for the 'modification.' worth it, because we weren't sure we would be moving in the next few years, after all!
since your condo is paid in full(wow, lucky you!)you can probably get a real good percentage rate. for our home equity line, we are prime (currently 4%) plus zero, because we have good credit, but some people are paying prime plus 2 or 3 percent.
you can shop around, especially since your condo is paid for. make the best deal for yourself!

Vixeninvegas

Friday, November 14, 2003 - 12:58 pm EditMoveDeleteIP
Oh I just love people in this group. No matter what subject that comes up there is someone around with helpful information.

For some reason the bank loan officer keeps insisting that the Home Equity Line of Credit is the way for me to go. She just called & said my credit was really good (I think she quoted me some number like 795 or something but I have no idea what that means???). She also said that there wasn't any problem approving me for the LOC.

I was told there aren't any closing costs - its thru the bank where I have my checking account.

Gosh I hate decisions! LOL

Mware

Friday, November 14, 2003 - 02:53 pm EditMoveDeleteIP
795 is awesome, Vixen! Congrats to you for the hard work it took to get your score up that high!

Each of the three major credit bureaus (Experian, Trans Union, and Equifax) assign everyone a "credit score" - a number usually between 350 and 850 which allows prospective lenders to get a feeling at a glance about how creditworthy you are. The higher the score, the better the risk you are, and you're right near the top.

If you think you're likely to get into your current situation again (more bills to pay off and consolidate) or need more money soon for a large purchase of some kind, the line of credit is a really good way to handle it. If, on the other hand, you've decided this is IT, and you don't have any reason to think you'd need a loan again for the foreseeable future, then the fixed rate loan might be better.

Tabbyking

Friday, November 14, 2003 - 05:57 pm EditMoveDeleteIP
vixen, i believe the home equity line is the way to go, too, only because they will open a top dollar 'amount', but you don't have to use it all. let's say they open a line of credit for 20k, but you don't use it all...take out 10 or 11k and pay off all other bills, etc. there is still money available, but you don't take it if you don't need it.
if you take an actual 'loan' rather than a 'line', they will want a specific amount, so you have to know exactly how much you want. they will 'loan' you 10k or 17k or whatever and you owe that amount back.
also, not all loans are tax deductible and a line of credit would probably be. (it is in california)