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So they'll give you the 4.5% rate if your 1st mortgage is $224 and your 2nd/HELOC is $56 ?
Are you only using brokers? Have you tried a credit union, Bank of America, or Wells Fargo?
Almost makes me wonder if the broker's are insisting on the HELOC for more commission!
They will give me a 4.15% on the 1st mortgage if I take on the Heloc, otherwise it would be 4.25-4.5. Apparently since Im putting so much down, the interest rate will drop on the mortgage.
I was told by the broker that he doesnt even get paid on the Heloc since it is done through another bank.
I havent tried any other banks yet. I have already signed on the initial contract and have inspection next week. I was kind of assuming it was too late to shop around.?
Depends on whether or not you've signed papers with the broker or have a closing date.
So you pay 4.15% on $224,000 plus 5.25% on $56,000, or choose 4.25-4.5% on $280,000. Put those numbers into mortgage calculators and find out how much you will end up paying altogether (P&I, and any PMI if they may charge if you don't put 20% down) and choose whichever one is less.
HELOC's can be great or they can be a pain in the butt. If its written as interest only and plan on paying it down fast, but then you find competing needs for your cash... buying a house often means curtains, blinds, carpet, paint, possibly new faucets, refrigerator, plants, landscaping, lawnmowers, weed eaters, patio furniture, hot tubs, swimming pools.... it MAY be better in your situation to get it rolled into one loan where its harder to argue against paying the mortgage, but easier to say once we get the house fixed up we'll pay down the HELOC. Then you need need cars so the money goes there rather than the HELOC. Then the 10 year draw on the HELOC comes up, you've paid tons of interest on $56K, still have a sizable balance, and either have to refi it, or pay it off. It depends on your family whether or not your intentions to pay down the HELOC fast will actually happen.
Depends on whether or not you've signed papers with the broker or have a closing date.
So you pay 4.15% on $224,000 plus 5.25% on $56,000, or choose 4.25-4.5% on $280,000. Put those numbers into mortgage calculators and find out how much you will end up paying altogether (P&I, and any PMI if they may charge if you don't put 20% down) and choose whichever one is less.
HELOC's can be great or they can be a pain in the butt. If its written as interest only and plan on paying it down fast, but then you find competing needs for your cash... buying a house often means curtains, blinds, carpet, paint, possibly new faucets, refrigerator, plants, landscaping, lawnmowers, weed eaters, patio furniture, hot tubs, swimming pools.... it MAY be better in your situation to get it rolled into one loan where its harder to argue against paying the mortgage, but easier to say once we get the house fixed up we'll pay down the HELOC. Then you need need cars so the money goes there rather than the HELOC. Then the 10 year draw on the HELOC comes up, you've paid tons of interest on $56K, still have a sizable balance, and either have to refi it, or pay it off. It depends on your family whether or not your intentions to pay down the HELOC fast will actually happen.
Very informative post, thanks. I would rep you again if I could
We do have a closing date set for end of June, but have not yet signed anything with the broker, only the seller.
I ran the #s vs both and obviously short term the Heloc would be more, but over 30 years the mortgage + PMI would be more. Plus I hear getting the PMI taken off is a PITA.
We were planning to re do all the cabinets, floors, all new furniture, ect... But closing costs are coming in a bit more then I expected and I want to start contributing to the Heloc asap, we might have to do everything in stages. Everything is a give and take I guess.
I wasnt aware that they could freeze the Heloc, so thats good to know. I will probably stay away from cashing in my entire EF, but may take 10k out which would probably still leave me with 6 months of living expenses. I'm crossing my fingers for a big tax refund for the first time since I would be a home owner, so hopefully I can then contribute a big chunk towards it.
My only concern is my wife or I losing or job, or my bonuses being cut (my pay is 80% based on bonuses). If neither of these things happen we can pay it off it 2 years.
The tax deductions for homeowners are nice, but they may not amount to all that much depending on where you live. In fact, it may not even make sense to claim them for 2012 since it is a partial year.
As a married couple you get a standard deduction of $11,600. To claim your mortgage interest and property taxes, you itemize your deductions instead of taking the standard deduction.
Example: For an entire tax year the property taxes are $3000. An entire year of mortgage interest may be $15,600 and for your HELOC $2,940. That's $21,540. Since you'll be taking possession around 6/30 you'll only be flaming about half of $21,540 = $10,770. That's less than your standard deduction, so you would take the standard deduction.
In 2013, you would be claiming a deduction around $21,540. Subtract from $11,600 which you're already getting = $9,940. If you're in the 25% bracket that amounts to $9,940 x 25% = $2,485 in federal tax savings.
In other words, (a) the tax deduction benefit is only on the amount that exceeds the standard deduction you're already getting and (b) tax deductions reduce your taxable income they are NOT tax credits which directly reduce your tax due.
If your closing is around 6/30 it sounds like you have a few weeks to talk to other lenders. If you can deal directly with a bank you can avoid paying the broker's commission altogether. I don't know what the broker's commission is, but if its 1% that could be $2800-3250. Its worth it if they can get you a deal you can't get anywhere else, but I'd suggest trying.
It depends what state you're in as to the closing costs, but also depends on the bank fees such as origination fees and points. In todays market you should be able to get 4% without any points (1 point = 1% of the loan) and at most a 1% origination fee.
I'm in IL, Chicago if that makes any difference. I am not paying any points. The mortgage is only in my name ( she has a lower credit score and I was approved based on my income).
My fear is calling a credit union or another bank, them running my credit, and then it drops by a few points and disqualifies me for any loan.
Directly from the brokers quote...
Sales Price: 321,000.00
Refinance:
Closing Costs: 1,338.00
Other Third Party Costs: 919.00
Prepaids: 600.00
Escrow: 3,598.00
Title Charges: 2,215.00
Government Fees: 2,582.50
TOTAL COST: 332,252.50
Total Cost LESS:
Loan Amount: 224,700.00
Earnest Money:
Fees Customarily Paid by Seller: 5,300.00
Seller Paid Closing Costs:
2ndLoans: 56,300
I can understand your concern about comparing rates with other financial institutions and end up getting a higher rate because of a number of credit inquires. I would talk to a credit union and ask them if they can discuss your options without pulling your credit. You may be able to give them what you have and ask them if they can do better. I would wonder what exactly is included in the closing costs, third party costs, prepaids, title charges, and government fees - specifically how much is the bank charging to handle each one. For example, it is a given that the state/locality will charge fees for transfer of property and recording fees. But if the bank is charging you $1000 for an appraisal that should only cost $400....
My fear is calling a credit union or another bank, them running my credit, and then it drops by a few points and disqualifies me for any loan.
Multiple inquiries for the same type of credit within a short window WON'T lower your credit rating - the credit agencies will be able to tell you're loan shopping. It's viewed differently than a mortgage broker, car dealer, and furniture retailer all pulling your credit in a short time span - that's a flag that you're looking to take on multiple new credit lines, not shopping around for the best singular option for a home purchase.
It's not - comes off once the LTV goes under 80%. Since you're putting over 10% down, I see no reason to take out a 5.25% HELOC. Just pay extra towards the slightly higher 4% range note and yiu'll cross the 80% threshold about 25% earlier than with a 5.25% note.
Have you also looked into 20 and 15 year notes? You would get a lower interest rate and be able to get out from PMI even faster.
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