Home equity/Refinance question

TheMikeIsHot · 11-29-2011, 08:55 PM

I just bought a house (foreclosure and worst house on the block) and completely gutted it... redid just about everything in there, from electric to the kitchen. I'm in for $120k after all is said and done.

Houses in the neighborhood are going for anywhere from 150-175 and above. My place will be one of the nicer homes around. I'll have the place appraised soon just to get a value...

Anyhow, my question for those of you who know is can I take out a home equity loan or refinance or anything to pay down some student loan debt? My interest on these student loans is 9.75-11% on $40k and I'm hoping to knock down to a reasonable monthly payment.

Crackity Jones · 11-29-2011, 09:07 PM

Not a mortgage broker, but I think it depends on... what kind of mortgage and terms do you currently have? fixed? 15,30 yr? ARM? And how old is the mortgage?

Sounds like you have some equity, but a refi requires an appraisal (usually) which costs $, and there are closing costs... so you have to factor in all those things.

If you're credit is good and you can get a good rate, its worth paying down student loan debt.

Also, the appraisal is key- a lot of people overestimate the value added through renovations (though in your case sounds like you transformed the property).

TheMikeIsHot · 11-29-2011, 09:14 PM

[QUOTE=Crackity Jones;4257474]Not a mortgage broker, but I think it depends on... what kind of mortgage and terms do you currently have? fixed? 15,30 yr? ARM? And how old is the mortgage?

Sounds like you have some equity, but a refi requires an appraisal (usually) which costs $, and there are closing costs... so you have to factor in all those things.

If you're credit is good and you can get a good rate, its worth paying down student loan debt.

Also, the appraisal is key- a lot of people overestimate the value added through renovations (though in your case sounds like you transformed the property).[/QUOTE]

30yr fixed... and it's a brand new mortgage. I just closed in October and I'm finishing up the renos within the next couple of weeks.

My credit is very good.

And yes, I think we've transformed the property. Installed new drywall and insulation, knocked down two walls to open the kitchen and dining room to the living area, new kitchen cabinets and counters, new bathroom, replaced the wood paneling, new ceiling with recessed lighting, refinished the original hardwood floors, rewired the entire house and upgraded electrical service to 200amps... we've been busy.

GMCJETS · 11-29-2011, 09:18 PM

I dont think you can get another primary mortgage on the property to pay off an existing mortgage. You could probably get a home equity loan and pay off the student loan for a very low interest and its tax deductable. Id like to see some before and after pics.

TheMikeIsHot · 11-29-2011, 09:22 PM

[QUOTE=GMCJETS;4257493]I dont think you can get another primary mortgage on the property to pay off an existing mortgage. You could probably get a home equity loan and pay off the student loan for a very low interest and its tax deductable. Id like to see some before and after pics.[/QUOTE]

thanks.

will post once it's finished.

Crackity Jones · 11-29-2011, 09:22 PM

You work fast. I would say see how the appraisal turns out, and check zillow for comps in your area. You might have a good chance at pulling some decent cash out of the property.

Don't let the banks dictate the terms- they will try to bend you over with hidden fees and closing costs... but since its a refi and you are in good credit shape, let them know you are in charge and willing to shop.

Good luck!

Crackity Jones · 11-29-2011, 09:24 PM

Why not? Isn't that what a refi is?

[QUOTE=GMCJETS;4257493]I dont think you can get another primary mortgage on the property to pay off an existing mortgage. You could probably get a home equity loan and pay off the student loan for a very low interest and its tax deductable. Id like to see some before and after pics.[/QUOTE]

GMCJETS · 11-29-2011, 09:29 PM

[QUOTE=Crackity Jones;4257507]Why not? Isn't that what a refi is?[/QUOTE]

When you refinance you need to pay closing costs all over again. Im no expert but I dont think you can go to a mortgage company and say I want another mortgage to pay this one off. Im not sure though.

Crackity Jones · 11-29-2011, 09:41 PM

[QUOTE=GMCJETS;4257516]When you refinance you need to pay closing costs all over again. Im no expert but I dont think you can go to a mortgage company and say I want another mortgage to pay this one off. Im not sure though.[/QUOTE]

I have to disagree- that's precisely what a refi is: a bank wants your $$$ and therefore to hold your mortgage so they pay off your old one and give you a new one (which obviously should have better terms, saving you $$$ in the long run). There are certainly closing costs which are coming out-of-pocket, but in the case of a major renovation where there is equity to be tapped, that shouldn't be a problem.

Because of insanely-low rates these days, there could be a delay in getting the refi to close because these days everyone and his Mom is trying to refi.

I just have to think that paying down high-interest debt with low-interest debt by refi will almost always work in your favor (again, provided the closing costs are not astronomical).

Home equity loans are more appropriate where there has been a significant rate drop since the loan was originated (not applicable here) or when the mortgage is aged and his property increased in value and the owner just needs cash.

SAR I · 11-29-2011, 10:45 PM

[QUOTE=TheMikeIsHot;4257462]

Anyhow, my question for those of you who know is can I take out a home equity loan or refinance or anything to pay down some student loan debt? My interest on these student loans is 9.75-11% on $40k and I'm hoping to knock down to a reasonable monthly payment.[/QUOTE]

Since you're in the midst of upgrading the home, take a look at Home Improvement loans at rates lower than the student loans. No one will question where the money went since the house is under major restoration.

When you get, say, $50K from the loan, immediately use $40 to pay off the student note and then use the remaining $10K to make the first year's payments on the Home Improvement Loan.

Just doing a quick check, I found a few banks offering 5-7% Home Improvement Loans. No re-fi, nothing damaging to the credit rating, justifiable due to the effort you're extending, etc.

SAR I

AlwaysGreenAlwaysWhite · 11-29-2011, 11:08 PM

[QUOTE=SAR I;4257598]Since you're in the midst of upgrading the home, take a look at Home Improvement loans at rates lower than the student loans. No one will question where the money went since the house is under major restoration.

When you get, say, $50K from the loan, immediately use $40 to pay off the student note and then use the remaining $10K to make the first year's payments on the Home Improvement Loan.

Just doing a quick check, I found a few banks offering 5-7% Home Improvement Loans. No re-fi, nothing damaging to the credit rating, justifiable due to the effort you're extending, etc.

SAR I[/QUOTE]

Dont know a ton about it but seems like solid advice

Dimitri_0515 · 11-30-2011, 12:36 AM

Ahhhhh out of Bergen County for houses. $150-175k I wish

southparkcpa · 11-30-2011, 06:25 AM

[QUOTE=TheMikeIsHot;4257462]I just bought a house (foreclosure and worst house on the block) and completely gutted it... redid just about everything in there, from electric to the kitchen. I'm in for $120k after all is said and done.

Houses in the neighborhood are going for anywhere from 150-175 and above. My place will be one of the nicer homes around. I'll have the place appraised soon just to get a value...

Anyhow, my question for those of you who know is can I take out a home equity loan or refinance or anything to pay down some student loan debt? My interest on these student loans is 9.75-11% on $40k and I'm hoping to knock down to a reasonable monthly payment.[/QUOTE]

Yes.... people do this ALL the time. Why dont you simply refinance with a new primary mortgage for as MUCH as they'll give you, say at 3.5 percent. Payoff the 1st mortgage and the balance to your student loans?

A good mortgage company will have reps that can walk you through this. WestCoast Offensive does this stuff.

quantum · 11-30-2011, 09:24 AM

[QUOTE=southparkcpa;4257720]WestCoast Offensive does this stuff.[/QUOTE]

you're kidding. I thought he ran a medical marijuana farm. :eek:

Banks81 · 11-30-2011, 10:16 AM

[QUOTE=TheMikeIsHot;4257482]30yr fixed... and it's a brand new mortgage. I just closed in October and I'm finishing up the renos within the next couple of weeks.

My credit is very good.

And yes, I think we've transformed the property. Installed new drywall and insulation, knocked down two walls to open the kitchen and dining room to the living area, new kitchen cabinets and counters, new bathroom, replaced the wood paneling, new ceiling with recessed lighting, refinished the original hardwood floors, rewired the entire house and upgraded electrical service to 200amps... we've been busy.[/QUOTE]

Unfortunately the cosmetic renovation won't improve the value of the home from an appraisal standpoint. Appraisals look at the number of rooms, surrounding house values, etc. The "newness" of the interior does not come into play.

As for paying off the loan... sure! You can use refi money for whatever you want. As someone mentioned earlier, you will be charged for closing costs all over again (which may only be $3k and considered worth it) and some mortgages require that you wait at least 6 months before you can refi.

GMCJETS · 11-30-2011, 10:44 AM

How long do you plan on living in the house is the big question? Many who do this wind up with financial problems down the road. When its time to sell the house and you barely cover the 1st and 2nd mortgage and walk away with nothing or owe money. Be careful and be wise.

bitonti · 11-30-2011, 10:44 AM

make sure you can actually pay the student loan off early. Some of these lenders flat out won't let you... they want the interest every month. If you got a high interest student loan, chances are the interest rate isn't the only unfavorable term in that contract.

PlumberKhan · 11-30-2011, 10:45 AM

[QUOTE=quantum;4257799]you're kidding. I thought he ran a medical marijuana farm. :eek:[/QUOTE]

Both.

At least he has a legitimate answer when someone asks "WTF are [I]you[/I] smoking?!?"....

Alkrotraz · 11-30-2011, 05:27 PM

A home equity loan or HELOC can be tax deductable up to 100K and usually require no costs out of pocket.

Only catch is two fold, one interest rate is variable so it could rise over time and if you are in AMT and use funds for non house related activities you lose your tax deduction on the interest on the home equity loan.

BAC, C, ING or Chase can approve you on-line pretty easy

Crackity Jones · 11-30-2011, 07:07 PM

OP: Just wanted to note- someone pointed out that some student loans (especially those that have been consolidated) carry a penalty for early repayment (which is an absolute joke, but that's a topic for another day), so I would confirm that you even have that as an option. And yes, sometimes you have to wait a min. time period before mortgage loan mods in general are even an option so check that too.

Also, my experience is that you might need to talk to a different bank than the one that has your current mortgage- they want to keep you as a customer, not talk to you about a refi... I called mine and started talking refi rates and they got all weirded out, as if it were a stupid idea... and then I talked to another bank and they were bending over backwards to help me out. Again, good luck.

11-29-2011, 08:55 PM	#1
TheMikeIsHot this won't end well All Pro Join Date: Mar 2008 Location: Philadelphia Posts: 7,042	Home equity/Refinance question I just bought a house (foreclosure and worst house on the block) and completely gutted it... redid just about everything in there, from electric to the kitchen. I'm in for $120k after all is said and done. Houses in the neighborhood are going for anywhere from 150-175 and above. My place will be one of the nicer homes around. I'll have the place appraised soon just to get a value... Anyhow, my question for those of you who know is can I take out a home equity loan or refinance or anything to pay down some student loan debt? My interest on these student loans is 9.75-11% on $40k and I'm hoping to knock down to a reasonable monthly payment.

11-29-2011, 09:07 PM	#2
Crackity Jones can, in fact, wait; prefers not to Undrafted Free Agent Join Date: Dec 2010 Posts: 126	Not a mortgage broker, but I think it depends on... what kind of mortgage and terms do you currently have? fixed? 15,30 yr? ARM? And how old is the mortgage? Sounds like you have some equity, but a refi requires an appraisal (usually) which costs $, and there are closing costs... so you have to factor in all those things. If you're credit is good and you can get a good rate, its worth paying down student loan debt. Also, the appraisal is key- a lot of people overestimate the value added through renovations (though in your case sounds like you transformed the property). Last edited by Crackity Jones; 11-29-2011 at 09:10 PM.

11-29-2011, 09:14 PM	#3
TheMikeIsHot this won't end well All Pro Join Date: Mar 2008 Location: Philadelphia Posts: 7,042	[QUOTE=Crackity Jones;4257474]Not a mortgage broker, but I think it depends on... what kind of mortgage and terms do you currently have? fixed? 15,30 yr? ARM? And how old is the mortgage? Sounds like you have some equity, but a refi requires an appraisal (usually) which costs $, and there are closing costs... so you have to factor in all those things. If you're credit is good and you can get a good rate, its worth paying down student loan debt. Also, the appraisal is key- a lot of people overestimate the value added through renovations (though in your case sounds like you transformed the property).[/QUOTE] 30yr fixed... and it's a brand new mortgage. I just closed in October and I'm finishing up the renos within the next couple of weeks. My credit is very good. And yes, I think we've transformed the property. Installed new drywall and insulation, knocked down two walls to open the kitchen and dining room to the living area, new kitchen cabinets and counters, new bathroom, replaced the wood paneling, new ceiling with recessed lighting, refinished the original hardwood floors, rewired the entire house and upgraded electrical service to 200amps... we've been busy. Last edited by TheMikeIsHot; 11-29-2011 at 09:17 PM.

11-29-2011, 09:18 PM	#4
GMCJETS Been there done that. Banned Join Date: Jan 2009 Posts: 5,658	I dont think you can get another primary mortgage on the property to pay off an existing mortgage. You could probably get a home equity loan and pay off the student loan for a very low interest and its tax deductable. Id like to see some before and after pics.

11-29-2011, 09:22 PM	#5
TheMikeIsHot this won't end well All Pro Join Date: Mar 2008 Location: Philadelphia Posts: 7,042	[QUOTE=GMCJETS;4257493]I dont think you can get another primary mortgage on the property to pay off an existing mortgage. You could probably get a home equity loan and pay off the student loan for a very low interest and its tax deductable. Id like to see some before and after pics.[/QUOTE] thanks. will post once it's finished.

11-29-2011, 09:24 PM	#7
Crackity Jones can, in fact, wait; prefers not to Undrafted Free Agent Join Date: Dec 2010 Posts: 126	Why not? Isn't that what a refi is? [QUOTE=GMCJETS;4257493]I dont think you can get another primary mortgage on the property to pay off an existing mortgage. You could probably get a home equity loan and pay off the student loan for a very low interest and its tax deductable. Id like to see some before and after pics.[/QUOTE]

11-29-2011, 09:29 PM	#8
GMCJETS Been there done that. Banned Join Date: Jan 2009 Posts: 5,658	[QUOTE=Crackity Jones;4257507]Why not? Isn't that what a refi is?[/QUOTE] When you refinance you need to pay closing costs all over again. Im no expert but I dont think you can go to a mortgage company and say I want another mortgage to pay this one off. Im not sure though.

11-29-2011, 09:41 PM	#9
Crackity Jones can, in fact, wait; prefers not to Undrafted Free Agent Join Date: Dec 2010 Posts: 126	[QUOTE=GMCJETS;4257516]When you refinance you need to pay closing costs all over again. Im no expert but I dont think you can go to a mortgage company and say I want another mortgage to pay this one off. Im not sure though.[/QUOTE] I have to disagree- that's precisely what a refi is: a bank wants your $$$ and therefore to hold your mortgage so they pay off your old one and give you a new one (which obviously should have better terms, saving you $$$ in the long run). There are certainly closing costs which are coming out-of-pocket, but in the case of a major renovation where there is equity to be tapped, that shouldn't be a problem. Because of insanely-low rates these days, there could be a delay in getting the refi to close because these days everyone and his Mom is trying to refi. I just have to think that paying down high-interest debt with low-interest debt by refi will almost always work in your favor (again, provided the closing costs are not astronomical). Home equity loans are more appropriate where there has been a significant rate drop since the loan was originated (not applicable here) or when the mortgage is aged and his property increased in value and the owner just needs cash.

11-29-2011, 10:45 PM	#10
SAR I is excitedly looking forward to December22, the last home game, The Rexecution Jets Insider VIP Join Date: Apr 2005 Posts: 38,669	[QUOTE=TheMikeIsHot;4257462] Anyhow, my question for those of you who know is can I take out a home equity loan or refinance or anything to pay down some student loan debt? My interest on these student loans is 9.75-11% on $40k and I'm hoping to knock down to a reasonable monthly payment.[/QUOTE] Since you're in the midst of upgrading the home, take a look at Home Improvement loans at rates lower than the student loans. No one will question where the money went since the house is under major restoration. When you get, say, $50K from the loan, immediately use $40 to pay off the student note and then use the remaining $10K to make the first year's payments on the Home Improvement Loan. Just doing a quick check, I found a few banks offering 5-7% Home Improvement Loans. No re-fi, nothing damaging to the credit rating, justifiable due to the effort you're extending, etc. SAR I

11-29-2011, 11:08 PM	#11
AlwaysGreenAlwaysWhite is all out of fuCks to give... All Pro Join Date: Dec 2008 Posts: 7,446	[QUOTE=SAR I;4257598]Since you're in the midst of upgrading the home, take a look at Home Improvement loans at rates lower than the student loans. No one will question where the money went since the house is under major restoration. When you get, say, $50K from the loan, immediately use $40 to pay off the student note and then use the remaining $10K to make the first year's payments on the Home Improvement Loan. Just doing a quick check, I found a few banks offering 5-7% Home Improvement Loans. No re-fi, nothing damaging to the credit rating, justifiable due to the effort you're extending, etc. SAR I[/QUOTE] Dont know a ton about it but seems like solid advice

11-30-2011, 12:36 AM	#12
Dimitri_0515 Banned Join Date: Jun 2007 Posts: 11,182	Ahhhhh out of Bergen County for houses. $150-175k I wish

11-30-2011, 06:25 AM	#13
southparkcpa I see the 88 to 97 period all over again. Jets Insider VIP Join Date: Sep 2005 Location: NC Posts: 15,696	[QUOTE=TheMikeIsHot;4257462]I just bought a house (foreclosure and worst house on the block) and completely gutted it... redid just about everything in there, from electric to the kitchen. I'm in for $120k after all is said and done. Houses in the neighborhood are going for anywhere from 150-175 and above. My place will be one of the nicer homes around. I'll have the place appraised soon just to get a value... Anyhow, my question for those of you who know is can I take out a home equity loan or refinance or anything to pay down some student loan debt? My interest on these student loans is 9.75-11% on $40k and I'm hoping to knock down to a reasonable monthly payment.[/QUOTE] Yes.... people do this ALL the time. Why dont you simply refinance with a new primary mortgage for as MUCH as they'll give you, say at 3.5 percent. Payoff the 1st mortgage and the balance to your student loans? A good mortgage company will have reps that can walk you through this. WestCoast Offensive does this stuff.

11-30-2011, 09:24 AM	#14
quantum GFY Snatchez! Hall Of Fame Join Date: Nov 2004 Location: LI Posts: 17,877	[QUOTE=southparkcpa;4257720]WestCoast Offensive does this stuff.[/QUOTE] you're kidding. I thought he ran a medical marijuana farm. :eek:

11-30-2011, 10:16 AM	#15
Banks81 All League Join Date: Sep 2006 Location: Lake Hiawatha, NJ Posts: 3,598	[QUOTE=TheMikeIsHot;4257482]30yr fixed... and it's a brand new mortgage. I just closed in October and I'm finishing up the renos within the next couple of weeks. My credit is very good. And yes, I think we've transformed the property. Installed new drywall and insulation, knocked down two walls to open the kitchen and dining room to the living area, new kitchen cabinets and counters, new bathroom, replaced the wood paneling, new ceiling with recessed lighting, refinished the original hardwood floors, rewired the entire house and upgraded electrical service to 200amps... we've been busy.[/QUOTE] Unfortunately the cosmetic renovation won't improve the value of the home from an appraisal standpoint. Appraisals look at the number of rooms, surrounding house values, etc. The "newness" of the interior does not come into play. As for paying off the loan... sure! You can use refi money for whatever you want. As someone mentioned earlier, you will be charged for closing costs all over again (which may only be $3k and considered worth it) and some mortgages require that you wait at least 6 months before you can refi.

11-30-2011, 10:44 AM	#16
GMCJETS Been there done that. Banned Join Date: Jan 2009 Posts: 5,658	How long do you plan on living in the house is the big question? Many who do this wind up with financial problems down the road. When its time to sell the house and you barely cover the 1st and 2nd mortgage and walk away with nothing or owe money. Be careful and be wise.

11-30-2011, 10:44 AM	#17
bitonti searching Hall Of Fame Join Date: Apr 2003 Location: Philly Posts: 38,786	make sure you can actually pay the student loan off early. Some of these lenders flat out won't let you... they want the interest every month. If you got a high interest student loan, chances are the interest rate isn't the only unfavorable term in that contract.

11-30-2011, 10:45 AM	#18
PlumberKhan BRACE YOURSELVES FOR 12... Banned Join Date: Feb 2006 Location: Van down by the river Posts: 21,013	[QUOTE=quantum;4257799]you're kidding. I thought he ran a medical marijuana farm. :eek:[/QUOTE] Both. At least he has a legitimate answer when someone asks "WTF are [I]you[/I] smoking?!?"....

11-30-2011, 05:27 PM	#19
Alkrotraz Practice Squad Join Date: Feb 2011 Posts: 371	A home equity loan or HELOC can be tax deductable up to 100K and usually require no costs out of pocket. Only catch is two fold, one interest rate is variable so it could rise over time and if you are in AMT and use funds for non house related activities you lose your tax deduction on the interest on the home equity loan. BAC, C, ING or Chase can approve you on-line pretty easy

11-30-2011, 07:07 PM	#20
Crackity Jones can, in fact, wait; prefers not to Undrafted Free Agent Join Date: Dec 2010 Posts: 126	OP: Just wanted to note- someone pointed out that some student loans (especially those that have been consolidated) carry a penalty for early repayment (which is an absolute joke, but that's a topic for another day), so I would confirm that you even have that as an option. And yes, sometimes you have to wait a min. time period before mortgage loan mods in general are even an option so check that too. Also, my experience is that you might need to talk to a different bank than the one that has your current mortgage- they want to keep you as a customer, not talk to you about a refi... I called mine and started talking refi rates and they got all weirded out, as if it were a stupid idea... and then I talked to another bank and they were bending over backwards to help me out. Again, good luck.