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Buying a house - which option is better? Normal through Mortgage OR Line of Credit? |
Buying a house - which option is better? Normal through Mortgage OR Line of Credit? Mortgage. Most lenders won't offer a line of credit large enough for a house without it being called a mortgage loan, and again that does also give you the best interest rate. If you are a teacher, in law enforcement, or have served in the armed forces, you may be able to get an even better rate, but that will also depend on where you live. What kind of line of credit are you referring to? I would 100% say through a Mortgage. A) it looks better on your credit report and B) you'll get a lower interest rate than on a line of credit normal mortgage's are better, lines of credits typically have higher interet rates then a 30 year fixed mortgage A great deal depends on just how long you plan to keep the house or retain the mortgage. 30 year fixed rate loans are at a rate of around 6% today for a 30 day lock at a par (no points paid to lower the rate). If you are planning on being in the home for a 3-7 year period you can get an even lower fixed rate. The payments are amortized over 30 years in each of these scenarios, principal, interest and taxes and insurance (if required by the investor or requested by the borrower). Lines of credit are usually, at least initially, adjustable rate loans based on the prime interest rate with add ons to the margin for lower credit scores or higher loan to value. Prime is at 8.25% right now, so a fixed looks pretty good unless you are planning on keeping the property for a very short time and want the interest only payments offered by a line of credit. 20+ years as a direct mortgage lender If you mean getting a LOC on a new property that you do not own then you will find many landers will not make such a loan. If you are talking about using your LOC that is in place on a different property you can do that. Better when you expect the hold period for the new property to be short as there are few to no fees associated with using an existing LOC. If you expect to buy the property and hold for a while then a more traditional mortgage will work best in many (not all) cases. I would need more info before I could answer in a more precise fashion. http://johncorey.wordpress.com As a RE investor for over 20 years (multiple states & countries) I enjoy helping others with their RE questions. The link about takes you to my blog where I am running an Frequently Asked Questions dialog. Please ask questions if you want to know something specific. Or just add comments as to your experience as a real estate investor. |
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