View Full Version : line of credit or home equity loan?
we decided to stay in the house we've got, so we need to do some work -- mostly landscaping. maybe add a pool (though i'm pushing to be the only people with a lazy river constructed in their back yard). we'd pay off some credit cards while we're at it.
what's best to finance this? a line of credit or home equity loan?
anyone have any experience here?
we decided to stay in the house we've got, so we need to do some work -- mostly landscaping. maybe add a pool (though i'm pushing to be the only people with a lazy river constructed in their back yard). we'd pay off some credit cards while we're at it.
what's best to finance this? a line of credit or home equity loan?
anyone have any experience here?
I've always heard that a loan looks better on your credit record. I've heard folks don't like seeing an open line of credit on your record. But I ain't a banker.
meatpile
07-10-06, 12:37 PM
Cash!
:trophy:
Whatever you do get a fixed rate vehicle. Most lines of credit are variable rate, but there are a few out there where you can lock in.
The Brain
07-10-06, 01:04 PM
we decided to stay in the house we've got, so we need to do some work -- mostly landscaping. maybe add a pool (though i'm pushing to be the only people with a lazy river constructed in their back yard). we'd pay off some credit cards while we're at it.
what's best to finance this? a line of credit or home equity loan?
anyone have any experience here?PM Freakshow. I think he's a loan officer.
Freakshow
07-10-06, 01:24 PM
2 VERY different animals. On the home equity line you are only paying on what you borrowed. If you take out a $50,000 line, you only pay on what is being used...once it's repaid, you can use it again. The payments are generally interest only for 5,10, or 15 year periods. The downside???? They are attached to prime...prime was in the low 4's a couple of years back...now it's 8.25%.
Fixed loans are generally principal + interest...The rate is fixed...but you take the whole lump out at closing....and begin paying on it.
prime was in the low 4's a couple of years back...now it's 8.25%.
boooooooooo
HardHarry
07-10-06, 02:18 PM
Don't forget about the tax advantage of a HELOC Larry. Deducting interest is nice.
Freakshow
07-10-06, 03:13 PM
Of course the interest on the fixed rate second is treated the same as a HELOC...
we decided to stay in the house we've got, so we need to do some work -- mostly landscaping. maybe add a pool (though i'm pushing to be the only people with a lazy river constructed in their back yard). we'd pay off some credit cards while we're at it.
what's best to finance this? a line of credit or home equity loan?
anyone have any experience here?
The home equity line will be secured so it is going to be a better rate. If you have real good credit or are a "premium" customer, you should be able to get a rate at prime. The interest on you home equity line is also tax deductable.
Redsnapper
08-28-06, 01:54 PM
Also, try this little trick when you go to sell. Start a 2nd mortgage going up to 100% of the value of the home, pull out all the money, then sell. This way you don't pay taxes on capital gains, just a little trick I thought of, but have not yet put that one to use, but will in 3 1/2 years.
Freakshow
08-28-06, 01:58 PM
Uh...you don't pay capital gains on a primary residence unless you make...can't remember...something like $300,000.
As long as you live in your house for 2 of the last 5 years you do not pay taxes on gains when selling your primary residence. There may be a cap on it Freakshow says but I am not certain.
Freakshow
08-28-06, 02:16 PM
As long as you live in your house for 2 of the last 5 years you do not pay taxes on gains when selling your primary residence. There may be a cap on it Freakshow says but I am not certain.
There IS a cap...just can't remember what it is. I know it's OVER $200,000 for sure.
Redsnapper
08-28-06, 02:56 PM
OK, I remember hearing that now [no capital gains on primary, if owned more than 2 yrs], please apply to second homes and/or investment properties.
meatpile
08-28-06, 04:03 PM
There IS a cap...just can't remember what it is. I know it's OVER $200,000 for sure.
I think there's also a cap on how much you can borrow. I don't think you can pull $250k on a heloc or loan and write it all off. I may be wrong.
slydevl
08-28-06, 04:22 PM
Also, try this little trick when you go to sell. Start a 2nd mortgage going up to 100% of the value of the home, pull out all the money, then sell. This way you don't pay taxes on capital gains, just a little trick I thought of, but have not yet put that one to use, but will in 3 1/2 years.
This may be the dumbest bit of "advice" I have ever heard. Your closing lawyer will look at the orginal purchase price and compare it to the selling price to determine capital gains. Whether you have borrowed against the capital gains in any form is irrelevant.
Redsnapper
08-28-06, 04:35 PM
I may stand corrected, could've sworn a co-worker pulled this off, but I believe the title attorney was on board with him, (not disclosing names). Also, this is not the first time I've F'ed up here, but trying to keep those to a minimum now.
Shrapnel
08-29-06, 11:02 AM
This may be the dumbest bit of "advice" I have ever heard. Your closing lawyer will look at the orginal purchase price and compare it to the selling price to determine capital gains. Whether you have borrowed against the capital gains in any form is irrelevant.
This is correct. Doesn't matter if the property was free & clear, or mortgaged to the hilt. Capital gains is based on how much profit you made in sale price over purchase price + any improvements.
slydevl
08-29-06, 11:09 AM
This is correct. Doesn't matter if the property was free & clear, or mortgaged to the hilt. Capital gains is based on how much profit you made in sale price over purchase price + any improvements.
:wtf23:
It scares me when Shrapnel makes a serious post
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