Home Equity Loan - 50% LTV

Yes and No.. With a HELOC, you apply once and you have access to the funds when you need them without having to re apply each time.. After a period of time, in most cases 10 years, the draw period ends and your balance is amortized over the remaining 20 years for pay back.. With a refinance, you get all the funds you applied for up front, and you start paying interest immediately. If you think you need more funds in the future, you need to re apply. Also closing costs for cash out refinance transactions are higher than a HELOC. And most all HELOC's have adjustable rates. Another option is a first equity line of credit.. so your refinancing your first into a HELOC with the ability to tap into the equity at will, but again it's an adjustable rate mortgage... if you want to know all your options, The best advice I can give you is to contact a LOCAL mortgage broker, not the local "Big" bank, and certainly not one of those 50 states internet lenders...By applying with your LOCAL Broker, you have an advantage because he's familiar with local customs and works with numerous lenders, seeking out the best loan terms for your particular scenario. Because he has lower overhead, he can offer you lower rates and lower fees than most of the larger lenders.. I'm a Broker here in Scottsdale AZ and I only lend in Arizona. If you or someone you know is looking for financing options, feel free to contact me or pass along my information. 480-287-5714 WilliamAcres.com

Depending on your qualifying income, assets and personal cash flow, choosing a home equity line of credit over a fixed mortgage is questionable. On a HELOC, you would have line of credit that has variable terms. Presently, 30-year fixed mortgages have highly favorable interest rates that will not be seen again in our lifetime. What everyone can agree on is the interest rates will go up in the future...which means the cost of your HELOC. Although I'm an advocate of HELOC's for financial leverage, it will come down to your personal investment approach. Congrats your child!

The answer to your question depends on several factors. What rate do you have on your first mortgage? How much money are you wanting to borrow for your children's education? Generally speaking you can borrower 80 percent of the value of your home with a first mortgage and avoid private mortgage insurance in your monthly payment. If you can improve your overall rate on your mortgage by refinancing to a low fixed rate, then I would be inclined to refinance your first mortgage and take cash out. If you already have a low rate on your first mortgage and are not needing to borrow a lot on home equity then that might be your best option.

The real answer as to which is better is dependent upon the amount you need and the timing of when you need it, as well as the timing on re-paying it. With a HELOC, you only pay interest on the amount you borrow, when you borrow it. If you need $10,000 each year for 4 years, it may not make sense to borrow all $40,000 today when you don't need it all now. BUT, the cost of this convenience is that the rate on the HELOC is variable. Since we do not know when rates will begin to rise, and we do not know how high they will go, borrowing on an equity line for a long term can become expensive. Another thing to look at is how today's rates compare to your current rate. It may make more sense to refinance now, borrow the cash you will need for the future, lower the interest rate on the loan you already have and LOCK-IN today's great rates. The best advice I can give you is to contact a local Mortgage Banker/Broker, rather than one of the big banks or big national mortgage factories. Unlike a bank employee, who is most likely just an order taker, a Mortgage Broker/Banker is Trained, Tested and Licensed in all aspects of Mortgage Origination. He/She will have access to loan products of many lenders, not just those of one bank, and can properly guide you. But more importantly, He/She is trained to take a look at the various different options available to you and guide you into the one that makes the best sense for your situation. Don't forget to check out your selected Mortgage Originator at the National Mortgage Licensing System at www.NMLSConsumerAccess.org ~ Bert Carpenter, The LoansA2z team of NOVA Home Loans ~ NMLS 40586 ~ www.LoansA2z.com 888-889-9950