Quote:
Originally Posted by Deberg_1990
So whats the deal with them? Anyone ever done one? How do they work? Are they a good or bad thing?
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It used to be that you could take out an equity line up to 125% of the home's value. Of course, you were paying a ridiculous amount of interest, but people still did it.
Today, you will be hard pressed to find a program that lets you take out more than 90% of the homes value.
The way it works is you take what your house is worth, multiply it by 90% and then subtract your first mortgage balance. Then you have the equity available to borrow on.
You can get an equity line, or an equity loan. An equity line works like a credit card, and like a credit card the interest rate will typically rise and fall with the market.
With an equity loan, you have a fixed interest rate and a fixed payment.
Are they good? I used to be a fan of debt. Seriously, I thought the debt free crowd was stupid because I was using debt to build a glorious real estate empire.
Then, the bubble burst. I am going through bankruptcy right now. When I get to the other side, I will never, not for as long as I live, take out another loan. Not even a mortgage. I currently have a mortgage.... but once this house is paid off... I won't do it again.
Things always look great on paper, then life happens. The more equity you take out of your house, the harder it is to sell. And, if you lose your job, or need to relocate, you have a anchor around your neck that you can't get rid of.
I am not a fan. But, then again, I plan on paying cash from this point on.