Consolidating home equity loan into mortgage
There are other pros and cons in using a home equity loan for The rules governing home equity loans and HELOCs are very similar.
Unless you have a very solid income and live in an area where home prices are consistently rising, replacing consumer debt with an equity loan is probably not a good idea.
If you owe ,000 on your credit cards and your combined interest rate averages 20%, you would owe ,000 a year in interest on the balance, assuming it didn’t change.
Usually, you will also have to pay some principal each month.
Generally, the portion can’t exceed 43% in order to qualify, though lenders prefer something less than 35% in order to offer their best loan rate.
The biggest potential problem is that you convert a consumer debt, which doesn’t require collateral, into a home loan that does require collateral.You’ve made mortgage payments for the past 15 years, your home has soared in value and you now have access to a pool of cash using a home equity loan or line of credit.Sounds great if you need money to pay off debt, but think before you jump.If you can’t make the payments, you could lose your home.Lenders often want to know what you plan to use a home equity loan for.
If your home is worth $100,000 and you owe $80,000, the ratio is 80%.