Listen: Lohan, Mike, Fifteen Year discussed on Dollar Bank Mortgage Hour
"Home equity loans were always considered like a second mortgage or a second lien position. But you can certainly use that we actually have a lower interest rate if you are using that to pay off your first mortgage and have that become your first mortgage. Now, those interest rates are higher than thirty year fixed rate. Lohan says her fifteen fifteen. Yeah. I should say could you compare fifteen to a fifteen year home equity? It's going to be closer to four point seven four percent. And it just depends on the equity credit score in the amount. You're borrowing, but right around there is going to be a higher interest rate, but virtually no cost compared to a traditional mortgage, which may have two to three thousand dollars in costs, you know, pay two to three hundred dollars or four hundred dollars potentially in cost on a home equity firstly mortgage. Okay. So that's what attracts many people to it as the lower cost and shorter term. We'll talk about the types of things that you have to calculate in order to determine whether or not it's best to go with the home equity loan as compared to a traditional mortgage that would be the same term fifteen years. Well, I'd start with what your interest rate is. Now, that'd be the first thing you need to look at are you going to save money by reducing your interest rate next thing you'd look at us. How's it going to impact your payment? Are you going to see an increase in your monthly payment because you easily could even if you had a interest rate that was similar on a thirty year fixed rate? Raider even a percent higher. You're probably going to see a higher payment on the fifteen year. But you're going to pay it off at at a faster pace with maybe a payment. That's not double what you were paying on a thirty year mortgage. Maybe ten twenty thirty percent higher depending on what your interest rate is. And how long you've had that loan. Now. The next thing you look at his between the two whether it's a home equity our mortgage, if you look at the cost is how long is it going to take to recoup those costs if you look at a payment on a fifteen year home equity versus a payment on a fifteen year mortgage it and take the closing costs. How soon will you recoup that would be the best analysis to figure out which one is going to be better for you. Now would also is factored by the dollar amount of your loan. So if you're a four hundred thousand dollar mortgage paying the closing costs is a much lower percentage of your loan amount than a fifty thousand dollar loan. So a fifty thousand dollar loan the home equa. Alone may be more attractive than the four hundred thousand dollar loan. And we can certainly help you with those calculations. And what I look at is. Okay. We'll take a four hundred thousand dollar loan. A fifteen year fixed rate of four percent. We look at the total cost over the life of the loan. If the fifteen year home equity loan at a higher interest rate, but lower closing costs. We look at the total cost over the life of the loan and determine which is ultimately going to save you the most and subtract out whatever cost are on both sides. And that's how you analyse which is the most beneficial. We can tell you there's certainly break points. If you're above a hundred and fifty or or so most likely a mortgage is going to be better suited for you. Unless this is a short term thing, and you're going to be out of the house in two to three years. We're going to try to pay it off more aggressively. If you have any questions for Mike, you're welcome."