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Heloc or Heloan??Heloc or Heloan??
Southerngirl said: "Hi I am interested in getting either a heloc or heloan to pay off all of our debt. I don't have any other mortgages or car notes. We bought our home last April (05) and put 20% down to prevent having to pay PMI. The home is worth 190,000 and we owe 127,000. Our credit scores are not to good
because of high utilization and new credit within the past 12 months. We
don't have any negatives, but our balances are high. We need around 40k
to pay everything in full. I'm not sure which way to go any help would be great. Also our FICO middle score is 580."
creditgirl said: "Due to the credit score you will mostly likely only qualify for a HELOAN. Typically HELOCS require a score of 620 or better. Also, in today's market a HELOAN may be better for you seeing as though the Prime Rate is now 8%. The way a HELOC works is that the lender will set a margin and every month your interest rate will change by adding the margin to prime. Assuming your margin is lets say 3.50, right of the back your rate will be 11.50%. Now that is horrible for you credit score, however keep in mind that the rate can possibly increase each month depending on the prime rate. I have not seen the prime rate go down at all lately. As a matter of fact it has been on a steady incline.
My suggestion would be to apply for the HELOAN, pay off whatever debt is necessary to achieve a low utilization on your credit cards and refinance the 1st and 2nd mortgage together once your scores are over 620.
There is a really good site you can check out at [URL="http://www.yourmtgdepot.com"][/URL][url]www.yourmtgdepot.com[/url]. You will find some really good information on this site as well as you might want to contact them to see if they can help you out."
Southerngirl said: "Thank you for your help."
kevinloans said: "Just curious what is your rate on the first mortgage?"
Southerngirl said: "Hi,
My first mortgage interest rate is 5 1/4%. This is why refinancing is not an option at this time.
Any input will be helpful.
Thanks."
kevinloans said: "With a 580 FICO score, you are borderline in luck of getting a HELOC. That's the minimum that companies will take for a HELOC and pending that you have no mortgage lates. Also if you were to refi with a 580 FICO, you wouldn't be able to qualify for an "A" paper loan. That requires a 620. With a 580 depending on the LTV, you may be looking around 7-9% compared to a HELOC at 11-13%. Depending on your mortgage history I may know of a program that's right around 6.75% with a 1% start rate. As long as you have NO MORTGAGE LATES(Over 30 days)."