Consumption and Real Estate
the difference between a fixed mortgage and a home equity loan is a home equity does not have closing cost?
Question : the difference between a fixed mortgage and a home equity loan is a home equity does not have closing cost?
fixed home equity loan
Best answer:
Answer by Apathy
Some home equity loans have closing costs.
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#2 written by Morgan M 1 year ago
A mortgage is a loan for the sale amount of the home plus closing costs less the down payment. A fixed mortgage is one where there is a fixed interest rate and a fixed length of the loan. A variable mortgage is one where the interest is set to a certain amount to begin with (usually a low, teaser rate) then varies with the general interest rates, making your monthly payment fluctuate. A home equity loan is one based on the value left in your home (per current market value backed up with appraisal) less the outstanding mortgage amount. It is usually separate from the mortgage loan, and you must already own your home. One thing you could be thinking of is equity cash out at purchase. If your home is valued at 100k, you purchase it for 80k leaving 20k available as equity. You can purchase the home and ask the lender to extend you the total amount of the value of the home instead of just the sales amount. You can do this with either a fixed or variable loan.
Bottom line, there is a fixed cost to the home. The more you pay down and the more you pay extra (to principal) the less you will owe in the end. -
#3 written by Chris 1 year ago
That is not the case: EVERY loan has closing costs – nothing is free. Usually when it’s advertised as “no closing cost” it’s because the Loan Officer is getting a bonus from the bank for putting you in a higher rate than you qualified for, or they tucked fees into other places like “admin fees” or others.
The difference is that usually a Home Equity Line Of Credit (or HELOC) is a loan that you are allowed to draw on more than once. It’s very similar to a credit card that’s secured by your property. If you have a limit of $ 10K, you can start at $ 0 and spend what you want. You can pay off the balance and then re-charge on the credit line. They usually also have an adjustable rate that is a set number attached to a national index (for example, “2+LIBOR” means your rate is 2% over the LIBOR index and when the LIBOR changes, so does your rate). However, some HELOCs have fixed rates as well.
A fixed rate second mortgage is a one-time deal. You take out a second mortgage and get the cash (or pay off debt) but you can’t take out more money later on without refinancing the loan completly.
There are a lot more differences: these are just the easy ones. If you are thinking about doing either a second or a HELOC, I’d strongly suggest you talk to your bank or mortgage broker to explore the pros and cons of each program. They both can be great depending on what your ultimate goal is.
Good luck!
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#4 written by diesel6999999 1 year ago
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#5 written by fren c 1 year ago
home equity loans that dont have closing costs have higher rates. there are always closing costs. so if you take a no closing cost loan your paying for it in aded interest for 15-30 years whatever the term is. its better to pay the closing cost than to have them raise the rate! at least your only paying the clsing costs its definatly better than paying .50% more for the entire amount of the loan!
read article 1
no closing cost loans costing you more than you think! -
#6 written by Nancy Kay 1 year ago
NO, that is not the difference. Any type of loan can be featured with a “no closing cost” promotion. A mortgage is a loan you take out to buy or refinance a property, and all the money is received at once, and it can have a fixed or variable interest rate, and you pay interest on the entire balance from day one. A home equity loan is a credit line that you establish, with your house as collateral, and you can draw down on the credit line from time to time in whatever amounts you want, and you pay interest (usually at a variable rate) only on the amount you have taken out.
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A home equity loan is a second mortgage used by home owners who have built up equity (cash) in their homes and may be looking to do some home improvements or pay off bills (or the many other reasons one may want money).
In order to find out how much equity (cash) you have in your home, you must first take the current value of your home and subtract what you currently owe on your mortgage. This should total the amount of equity you have in your home.
A fixed rate mortgage simply means that your interest rate will remain constant for the duration of your loan or at least until you decide to refinance. A fixed rate can be achieved in virtually any home loan you qualify for including a home equity loan. The only exception is a home equity line of credit, which has a rate that changes based on the financial markets (it’s a bit complicated to explain here but any mortgage professional would be glad to give a much more in-depth explanation).
Finally, home equity loans and home equity lines of credit have much lower closing costs than other mortgages, but there always are some. Even is a company claims there are no closing costs, they are simply wrapping the costs of closing into some other part of the loan.
I have attached two links to some helpful information regarding home equity loans and fixed-rate mortgages. This should give you a better idea of the differences between the two.