Which is right personal loan, 125% refinance, cash-out refinance,
2nd mortgage, home equity loan, home equity line-of-credit ?
It all depends on how long you plan to stay in your house, how much equity you
have and what you can afford. If you plan to stay in the house a long time and
have equity in your house, consider a refinance or adding a second mortgage or
home equity loan. If current mortgage rates are lower than your first mortgage
rate, then you may want to consider a refinance with cash-out on the first
mortgage. Remember that amortization starts over and the equity will grow
slowly if your mortgage starts over.
If you are comfortable with your first mortgage rates, then consider a second
mortgage or Home Equity Line of Credit. Use a second mortgage if you
cannot pay off the Home Equity Line within a short period, say 5 years. Use a
second mortgage if you feel comfortable with paying the money off in a longer
time period. i.e. you will be staying in your home.
Consider a 125% loan only if you do not
have much equity, cannot afford the payments on a personal loan and plan to stay in the
house a long time. Only the portion of the loan up to 100% is tax-deductible.
A personal loan has a higher rate and should only be used when you can pay the
loan back in a short time.
Mortgage rates are at an all time low, now is the best time to shop for a loan.
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