Can you use a HELOC to pay off a small 2nd mortgage?
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Anonymous
I got an 80/20 mortgage back in the day. Don't judge. I was really young. 
The 2nd mortgage is at a higher percentage rate than a HELOC would be and has about $15k left on it (and I have about 100k in home equity). Can I use a HELOC to just pay it off? |
Anonymous
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and my primary mortgage is well under 80% of the home value.
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Anonymous
| Sure (of course the HELOC rate may go up if interest rates go up but you can figure out the risk/reward there) |
Anonymous
| I assume you are trying to save interest from the second mortgage? How much are you saving if you only have 15k left? |
Anonymous
| Yes we did this but w/ a Home Equity Loan (not heloc). Rates are so low that we just paid off our rental with the Home Equity Loan. |
Anonymous
Meaning the rate was much lower than the loan on the rental home. |
Anonymous
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Probably not with a HELOC, unless you can convince the lender you're going to pay off the existing second trust. It's hard enough being a first subordinate, but no one will agree to being a second.
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Anonymous
| With interest rates rising, and given you have 20% equity, why not do a short term home loan? For instance, PenFed is currently offering a 10 year fixed rate home loan at 4.49%. 5 years in 3.74% |
Anonymous
| What is the rate on the 89 percent portion? Has the house gone up in value? Have you considered refinancing the fill mortgage? |
Anonymous
This. Your best bet might be to refi both of them into a single loan, depending on rates and current ltv. |
Anonymous
Unless the new rate is a decent savings overall (meaning, you would refinance even if you did not have the $15K second mortgage), the closing costs will not justify refinancing just to wrap in the $15K. Banks will usually cover the closing costs associated with a HELOC or fixed home loan, making them more advantageous if your first mortgage rate is good. |