open mtg vs. loc mtg

[MicFromMirus]

Which is better and why?

scenario: mtg=200k and pymt=5k (accelerated payments, to payout house earlier) amort=25y
mtg is presently in the form of a line of credit (loc) (interest only pymts)
the loc may be used from time to time, so if it was changed to an open mtg, a loc would have to be placed on the house

a)get an open mtg at prime-0.6 (4.15)
b)keep home equity loc (heloc) at prime (4.75)

 

[PeterKinchMortgageTeam]

QUOTE (MicFromMirus @ Apr 25 2008, 03:31 PM) Which is better and why?

scenario: mtg=200k and pymt=5k (accelerated payments, to payout house earlier) amort=25y
mtg is presently in the form of a line of credit (loc) (interest only pymts)
the loc may be used from time to time, so if it was changed to an open mtg, a loc would have to be placed on the house

a)get an open mtg at prime-0.6 (4.15)
b)keep home equity loc (heloc) at prime (4.75)


I`m not sure I understand your post. A mortgage and LOC are two different products. Becuase you pay only interest on an LOC and any additional payments would go directly to principal - there would be no amoritization. An amoritization only applies to a mortgage.

If you are making large principal reduction payments to your LOC and you will continue to do that until it`s paid off, consider converting it to a readvanceable product in which case you should be able to get both.

You`ll get a lower rate on the mortgage portion (if you go variable), and all of your principal paydown will become available on an LOC.

 

[kboughen]

QUOTE (MicFromMirus @ Apr 25 2008, 05:31 PM) Which is better and why?

scenario: mtg=200k and pymt=5k (accelerated payments, to payout house earlier) amort=25y
mtg is presently in the form of a line of credit (loc) (interest only pymts)
the loc may be used from time to time, so if it was changed to an open mtg, a loc would have to be placed on the house

a)get an open mtg at prime-0.6 (4.15)
b)keep home equity loc (heloc) at prime (4.75)

If the "mortgage" on your primary residence is currently an LOC containing your primary residence, real estate investments and personal spending, how are you determining the interest payments that are tax deductible? If this is how you are currently set up, I would separate your primary residence mortgage/LOC from your real estate investment LOC.


I would also consider doing this with a readvanceable mortgage on your principle residence which automatically converts principle paid on the mortgage over to the LOC for investing and tax deductible interest.