Happy November!

Hope you had a great Halloween!  Can you believe it's almost the end of 2018?  So much has happened this year.  The midterms are over, so we an at least relax a bit knowing what to expect now.  This month I want to talk about Home Equity Lines of Credit.

Heloc or re-lock, that is the question?

I get asked all the time whether someone should take out a home equity line of credit to fix their home, payoff debts, pay for college tuition or put in a pool.....or should they refinance their current mortgage and take the money out that way.

The answer is a bit more complex than just a Yes or No.

A Heloc is an adjustable loan, usually interest only for 10 years and then fully payable in 30 years. It's typically based on the Wall Street Prime Rate, which is currently at 5.25%. It has a fixed margin that ranges from .25% to 5% depending on many things like credit, loan to value, and type of property. This margin gets added to the index, which is the Prime Rate and that is your fully indexed rate that you will be paying this loan back with. It can fluctuate every single month and can go up to 18%.

To analyze this more accurately, If you choose to refinance your 1st mortgage, we'd have to see what your current payment is now, how much time you have left to pay and what that interest rate is currently and compare it to what the new interest rate and payment will be to determine whether or not it makes more sense to pull your money out this way.

Tax laws change all the time and currently Heloc's are only tax deductible if used for home improvement. (This must be documented carefully with receipts) On a normal refinance, you can deduct all the interest paid as a deduction up to I believe $750,000. (But don't take my word for it, consult with your CPA or tax adviser)

So as you can see, this is not just a simple Yes or No answer.......This is why Who YOU use Matters! This has to be carefully reviewed and analyzed in order to give you the best route for you to take when pulling money out of your home.

This is what I do here at Southern Oaks Mortgage, Inc. in Valencia. Clients always come first.....check us out at: 
https://www.yelp.com/biz/southern-oaks-mortgage-valencia

 

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