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Wed 8 Jun, 2005 09:56 am
My husband and I are planning on using the equity on our home to have cash for a new business. We have enough plenty of equity to borrow, and should be able to pay the additional monthly amounts if kept under $900 or so. However, I am unsure as which way is the best to go as there seems to be so many choices.
I received one quote for 6.15% for a second mortgage for 20 years - we would be paying an additional $887 month. Then I got a suggestion from another bank for a home equity line of prime less a quarter (could be slightly less) which is currently 5.75%. The problem with that is obvious as rates go up, so will our interest. However, the advantage is we will only be charged on what we use as we use it. As we probably would not need the entire loan from day one. In both situations we need to keep the loan/line for 3 years.
Also, any suggestions on where to go to get this information? I went with some of the bigger places, but would my little local bank be better?
BBB
If it were my choice, I would get an equity-based line of credit. It doesn't cost you anything if and until you use it.
I once did this just to have an emergency low interest money source, but I never had to use it---and it didn't cost me a thing.
I would be nervous about jeopardizing my home for a business start up, which can be an iffy venture.
I try to keep all of my financial activity in my credit union rather than banks. Banks don't give a sh*t about you, but your local credit union will be more helpful and, at a lower cost.
BBB
BBB - I don't have a local credit union, but do use a small local bank. Also, we will need to use the entire amount we plan on applying for (or at least about 90% of it), so it is not a question of emergency use.
We would not really be jeopardizing the home as with my salary alone, we plan on being able to pay for the original mortgage, plus either the line of equity or second loan. The other alternative would be to sell our home and use the money earned on the sale. Since we would have to pay rent to live some one, one of the other options made the most sense.
The business venture has already been researched to the hilt - including speaking with accountants, etc. So as far as the risk, it is small - all other similar ventures in the area have had a high success rate, etc.
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