The gf and I are buying a condo. We only have about 5-10% down. The rest we need to make up in either a 2nd mortgage or home equity line. Anyone know which would be the best way to go?

 

80/10/10 is probably the best way to go.

I would imagine the reate on the 2nd will be < than the HELOC

 

Yeah, we're looking at 80/10/10. Actually, the rate on the HELOC is about .5-1% lower (7.49 vs 7.99/8.49, I think).

 

What I did: about 15% down, the rest was a HE line. I locked in the rate of the HEL early, and then left it open after paying it off. Now I've got a line open to pay for the kitchen remodel and don't have to worry about trying to get financing.
YMMV

 

fixed 2nd mortgages are cheaper than HELOCs these days. The only benefit of the HELOC is that you can draw on it after paying it down, it's a line of credit like businesses have. The 2nd mortgages are loans that once paid down, they go away. That's it. HELOCs are so expensive.

I'm actually refi-ing and getting a fixed 2nd for 8%. But then, I'm going to pay it off completely with a fixed credit card loan at 5%. If you have good credit card loan offers at 4-5% for life of loan, then they are the way to go. But make sure you do it after the loan closes, otherwise it messes with your credit score and stuff.

 

Did you already get the loan?

It depends how long you will need to pay it off. The advice above is good and one other thing to keep in mind is that you typically have to pay an annual maintenance fee for a HELOC. Also, check if there is an early termination/payoff pentalty on either.

 

My HELOC is at a lower rate than that.

Also, don't forget that mortgage interest is tax-deductible, whereas other CC or loan interest isn't, so take that into account when rate comparing.

I dumped a bunch of my HELOC onto a couple of credit cards, too, but I did it with 0% intro rates. Then, I flip the card to another a month before the intro rate expires.

 

Yeah, there was an early termination fee if it was paid within three years.

We are actually going the PMI route. We figured since PMI is fully deductible and we won't be staying in this condo more than three years. We will also have the simplicity of one loan. Also, we figured the condo has great potential for appreciating quickly due to the area. PMI is only about $33 more versus the second loan.

 

Make sure that you make less than 100k than a household as that is the cutoff for PMI tax deduction.