Home Equity loans

[Rain Man]

As long as you use them for a specific purpose and pay them off religiously, they're better than getting a regular loan because you can write off the interest. But in my opinion, they should be used for a particular "project" and not on consumer purchases. I used them to do the rehab of my house when I bought it, and I thought that was a good purpose for it. If you get one and buy a bunch of stuff and default, your house gets auctioned off to some other happy family.

As opposed to a home equity loan, though, I'd recommend a HELOC (Home Equity Line of Credit). If you get one of those, you don't have to have an approval process to borrow against it. You just pay it up and down as you need it. Since it's a secured line of credit (using your house as collateral), the interest rates tend to be quite low in addition to being deductible.

[The Bad Guy]

Originally Posted by Rain Man

As long as you use them for a specific purpose and pay them off religiously, they're better than getting a regular loan because you can write off the interest. But in my opinion, they should be used for a particular "project" and not on consumer purchases. I used them to do the rehab of my house when I bought it, and I thought that was a good purpose for it. If you get one and buy a bunch of stuff and default, your house gets auctioned off to some other happy family.

As opposed to a home equity loan, though, I'd recommend a HELOC (Home Equity Line of Credit). If you get one of those, you don't have to have an approval process to borrow against it. You just pay it up and down as you need it. Since it's a secured line of credit (using your house as collateral), the interest rates tend to be quite low in addition to being deductible.

What I'm looking at would add about 300 dollars a month for a 10 year home equity loan. Main purpose is to finish basement which a ballpark cost is going to be around 20k and then pay off the students loans the wife and I currently have which is around another 20k. I'm paying well over 300 right now on those loans so the payment isn't the issue.

I didn't realize there was an approval process though. So with finishing the basement, I will need to have the plans and the estimates before they would give me the money?

[Amnorix]

Originally Posted by The Bad Guy

What I'm looking at would add about 300 dollars a month for a 10 year home equity loan. Main purpose is to finish basement which a ballpark cost is going to be around 20k and then pay off the students loans the wife and I currently have which is around another 20k. I'm paying well over 300 right now on those loans so the payment isn't the issue.

I didn't realize there was an approval process though. So with finishing the basement, I will need to have the plans and the estimates before they would give me the money?

It depends. If they consider it a construction loan, then yes. Which is a total PITA and you shoudl avoid if possible. If you have enough equity in the house to tap another $40K then they shouldn't consider it as a construction loan and you should be able to just take it.

If you go HELOC, as long as you have the equity to tap, they won't care about what you use it for. In fact, many people have the HELOC just "in case" and don't tap it at all. They aren't concerned about what you use it for.

[Bugeater]

Originally Posted by The Bad Guy

What I'm looking at would add about 300 dollars a month for a 10 year home equity loan. Main purpose is to finish basement which a ballpark cost is going to be around 20k and then pay off the students loans the wife and I currently have which is around another 20k. I'm paying well over 300 right now on those loans so the payment isn't the issue.

I didn't realize there was an approval process though. So with finishing the basement, I will need to have the plans and the estimates before they would give me the money?

No, they will just appraise your house to make sure you have the necessary equity to back the loan.

[The Bunk]

Originally Posted by Bugeater

No, they will just appraise your house to make sure you have the necessary equity to back the loan.

They did a drive-by appraisal when I setup my HELOC last year. Was relatively hassle free, and if memory serves, the total fees to set it up were ~$200.

Agree with Rain Man and Amnorix, as long as you are self-disciplined enough to handle it, the HELOC is a great option. You do need to be aware of the potential for the rate to increase though. My introductory rate was around 2%, which goes up to 4% after a year. But it's tied to prime, so if rates start going up, my rate will as well.