EDU Mortgage EDU

Frank White

Through thick and thin...
OT Supporter
Aug 1, 2006
8,590
Dirty Jerz
Can someone eli5 a HELOC? If I understand I can take it for say 50k if approved. I have a 50k bank account now, but don’t make payments unless I use the money.

Here’s where I get lost. Say I use 20k to get a roof. Now I have to pay back that 20k by the end of the 5 years? Or does it get absorbed into my mortgage somehow?
 
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saabguy

saabguy

Saab-free since 2013. Mortgage guru
OT Supporter
Aug 11, 2003
22,610
Loserville. Population: 1
Can someone eli5 a HELOC? If I understand I can take it for say 50k if approved. I have a 50k bank account now, but don’t make payments unless I use the money.

Here’s where I get lost. Say I use 20k to get a roof. Now I have to pay back that 20k by the end of the 5 years? Or does it get absorbed into my mortgage somehow?
Heloc is separate from your first mortgage. If you do $50k, then you have the ability to draw out up to $50k. Whatever amount you draw, you get a monthly bill to pay the interest only that’s due. So if you spend $30k for a roof, you just pay interest only payments on the $30k you used. Usually there’s a 10 year draw period. So you can draw against it, and pay it back, and draw again, and pay it back, etc, for the first 10 years. After 10 years, if there’s still a balance, they cut off your ability to draw against it. Then amortize they remaining amount due over the next 10 years, and that’s your payment until it’s paid back in full.
 

Frank White

Through thick and thin...
OT Supporter
Aug 1, 2006
8,590
Dirty Jerz
Heloc is separate from your first mortgage. If you do $50k, then you have the ability to draw out up to $50k. Whatever amount you draw, you get a monthly bill to pay the interest only that’s due. So if you spend $30k for a roof, you just pay interest only payments on the $30k you used. Usually there’s a 10 year draw period. So you can draw against it, and pay it back, and draw again, and pay it back, etc, for the first 10 years. After 10 years, if there’s still a balance, they cut off your ability to draw against it. Then amortize they remaining amount due over the next 10 years, and that’s your payment until it’s paid back in full.
Thank you
 

Menger

OT Supporter
Nov 23, 2011
24,274
A title company told me last week one of their friends had a piece of land, got house plans drawn, got a builder lined up to work up a budget. They went to get their loan from the bank. Got a quote for flood insurance:

$10,000 annual premium.

So they’re building somewhere else. It’s awful.
Isn't that kinda good tho? Taxpayers been subsidizing the insurance for these floor, hurricane, fire prone places for too long... maybe there's a good argument for that status quo but not helping people build more problems.
 

Boomchrono

OT Supporter
Jul 6, 2021
728
2004
Can't I refinance my house as if it were of way less value

I want to refinance with a new loan of about $20,000 over 120 years. Just dismiss the old loan that'll be fine
 
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saabguy

saabguy

Saab-free since 2013. Mortgage guru
OT Supporter
Aug 11, 2003
22,610
Loserville. Population: 1
Isn't that kinda good tho? Taxpayers been subsidizing the insurance for these floor, hurricane, fire prone places for too long... maybe there's a good argument for that status quo but not helping people build more problems.
$10k for a flood policy on a new house is absurd. It’s a brand new home. It will be built to the highest standards. Even if it is technically IN a flood zone, knowing this, they will ELEVATE the house, so even if there is a “flood event”, the house will be well above the base flood elevation and not really in danger of flooding. Even if it’s “in” a flood zone. I’m in a flood zone. 100’ down the street is NOT a flood zone. Hurricane Katrina went right through my city and my house didn’t flood. hurricane Ida a year ago brought A LOT of water, and it was several feet from being in danger. The lot where our new house is being built is partially in a flood zone and it’s the highest elevation property in the entire neighborhood. Our house won’t be “in” the flood zone, so we can do an amendment to the fema maps, but it’s pretty ridiculous that the maps place the property as a flood risk when it’s higher than any other house.
 

deadbeef

OT Supporter
Sep 5, 2020
1,799
Well THAT one shouldn’t go higher. Since it’s a new property and new flood policy, they pay the full-boat rate right from the outset. Anyone who has an existing flood policy, they can increase it something like 17% each year until they feel it’s reached an “appropriate” level. But won’t tell you what that level is.
Beach vacation house rental prices going to keep going up, I guess...
 
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Legend Zero

OT Supporter
Jan 14, 2005
36,072
And yet there were still people saying “2.75% seems high. I think it’ll go lower. I’ll wait.”

i feel dumb but can admit to making a mistake.

there was a SFH (~235k) and a townhouse (~185k) and decided to save money and buy the townhouse. i knew better but was scared with my first purchase - and the sfh has grown so much more in value (which i knew would happen). it's nice saving ~500-700 a mo but so wish i had the extra space, basement, at 2.75% vs the house now at 6% and $100k more. sucks. at least i got a roof over my head though.
 
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Nikuk

This simulation needs a reboot
OT Supporter
Jun 24, 2005
15,598
Buffalo, NY. Again.
What’s the prevailing advice on buying right now

I finally feel like I’m in a spot to buy in 2-3 months and the rates just keep climbing :hs:
Remember those choose your own adventure books? I hope so, cause you're in one:


Buy now or be priced out forever.

Wait for the rates to drop, they can't keep climbing for ever.

Just keep saving and pay cash, or are you incredibly poor.

The bubble is about ready to pop so of you buy today expect to incur paper losses in a matter of months but it won't mean anything unless you plan to sell.

The bubble is about ready to pop, so just HOLD and get in afterwards.
 
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saabguy

saabguy

Saab-free since 2013. Mortgage guru
OT Supporter
Aug 11, 2003
22,610
Loserville. Population: 1
What’s the prevailing advice on buying right now

I finally feel like I’m in a spot to buy in 2-3 months and the rates just keep climbing :hs:
Get prequalified. Get yourself in a position to buy if/when the opportunity presents itself. Set your expectations for price, and payment.

Poke around on your own for a while just seeing what’s available in your market. Watch prices and see if they are going up, holding steady, or falling. IF you can find a realtor who understands your position, then work with them. But be careful because a lot of desperate agents will tell you you have to ACT NOT because “our market is ON FIRE!!”

If you see something you like and you’re comfortable with the finances, no reason not to act. Especially if it’s a place you see yourself being in for several years.
 

silver60

OT Supporter
May 4, 2010
9,808
Dallas Tx
Investment properties and 2nd homes have been getting kicked in the dick for a while. If the going primary residence rate is 6.5%, to get that same rate with on a 2nd home or investment, I believe the cost is 4.125 points.

We bought a 2nd home, closed late July, and it was interesting to hear that we "had to" pay 2 points the LO said that's fannie / freddie these days it's part of how they price it.

we did get 6.125 30 year fixed so while at the time my wife didn't quite get it that it was "good" for that market, now she's starting to understand
 

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