Can anyone tell me the pros and cons of a HELOC?
If the percentage rate is good and there are no enrollment fees are we getting a good deal? It makes me nervous because I don't know anything about HELOC loans vs. other help that may be available.
We would like to be able to pay everything off in the next few years so that we can buy another house when I get out of grad school.
Can anyone help me figure this out?
Thanks
Answers:
Almost anyone you will talk to will tell you to only consolidate loans and debts that have higher interest rates. That you don't want to be paying more interest on money than you need to be. I like to look at it as amount of debt over time and only weight the interest rate unless its really different. If you have a loan at 5% and you are consolidating with a loan that is at 15% well that isn't worth it. In the case of a HELOC the rate shouldn't be bad at all. Plus you get tax deduct-ability. But a HELOC in almost every case the rate is variable.
I totally recommend debt concolidation. don't consolidate loans that you can pay off in less than a year. Your just going to pay a lot more in interest over time.
My personal option is, that in most states you can have a mortgage, a home equity and a HELOC.
What I would do is refinance pretty much all your debt with a fixed rate fixed term Home Equity Loan and then apply for a HELOC but don't use it. Fixed Rate Home Equity Loans with a fixed term keeps structure, is usually tax deductable and you aren't tempted to just make the minimum on your HELOC. Use the HELOC as a back up, a safety net of some sort. Shop a round for banks that have closing costs on Home Equity Loans. Trust me they exist, I sold no cost/ no fee Home Equity Loans for years.
Well the thing about a HELOC is the rates are variable. So your rate could go up at anytime without notice. If you get a fixed rate loan instead, at least you know what you're getting into. Also, some HELOCs charge a yearly fee- make sure yours doesn't but the bottom line is, one payment is sure a lot easier to keep track of, and if the interest rate is better, it could really be a good idea.
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