Consolidating mortgage and line of credit
Personal loan: For most borrowers, interest rates on debt consolidation loans are lower than rates on regular credit cards.
The rate you get depends on your credit history and income.
Because of these risks, Nerd Wallet recommends that you reserve home equity for emergencies.
Consider these pros and cons: Pros A homeowner with good credit is likely to have better options that don’t risk the house.
There’s another reason this distinction becomes important.
Because cash-out loans are more risky to the lender, they may only lend 75% to 80% of your equity in your home versus 90% on a rate/term refi. Since the consolidation of two loans is more complicated than a straightforward home mortgage, it’s best to speak personally with as many as three or four lenders.
But probably you didn’t expect that 5 payment to become a 0 payment that could move even higher if the prime rate increases.
They might use the money to pay off a debt, send a child to college, finance starting a business, or make a large purchase.
MORE: Calculate personal loan rates If you’ve ruled out other options, weighed the pros and cons of consolidating with home equity and determined it’s the viable path, then it’s a choice of a home equity loan or a HELOC.
Home equity loans are a type of second mortgage based on the value of your home beyond what you owe on your primary mortgage.
You may have refinanced recently when mortgage rates dropped to historic lows. According to Casey Fleming, mortgage advisor with C2 FINANCIAL CORPORATION, and author of, “The Loan Guide: How to Get the Best Possible Mortgage,” they are important because the terms and the amount you will pay on new mortgages could be very different.
“Let's say you and your neighbor are both getting 75% loan-to-value refinance loans, under the conforming loan limit of 7,000. Your loan would cost 0.625 points more than your neighbor's as of April, 2015.