Question: I have 30K and 9 years remaining on a 9.875/15 yr home loan. I want to refinance at a lower rate for 10 yrs and pay off the loan early (5 years or so) depending on my financial status in the coming years. In working with the loan officer of a local bank, they suggested I take out a home equity loan at 8.9% for the full amount for 10 years and then pay it off early if I so desired. Per the calculations this makes sense as their are no fees with this loan as opposed to the regular mortgage refinance.
My question – are there any problems with this approach? I can’t come up with any.
Answer: Frequently home equity loans are issued on a floating rate. You may want to see if this is true in your case. You may end up running a considerable risk if the interest rates change sharply upward during the time you are paying on the loan
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