I’m buying a second home that will cost me 340K. I am putting down 50% in cash. So all I need to do is finance 170K. If I get a Mortgage., there is a big closing cost, if I get a Home Equity Loan, no closing cost, and low interest (variable) and thus lower monthly payment. The question is, if I default, with the Equity Loan, (from job loss etc), will the bank take away both the homes, as apposed to the Mortgage Loan, where they would only take away the second home
So, which loan??
Also, which one is bettre for tax write-off
A home equity loan may have deductabilty limitations for tax purposes that may be different than a home acquisition loan. But if you get in an AMT situation, that may limit home interest deductions. It also may depend whether it is a 2nd home or investment property.
See http://www.irs.gov/faqs/faq-kw122.html which mentions Publications 936 and 505.
The HELOC would be the same as a mortgage. Still a lien on title. If you default the collateralized home would be in jeopardy.
The first mortgage is better for you in many ways. The closing costs are tax deductible, and so is the interest that you will pay. The first mortgage if you do a traditional 30 year fixed rate loan you will pay principle and interest. The HELOC will probably be an interest only tied to prime which is great right now but sooner or later prime will start to increase and put people in panic mode, If the HELOC is on your primary residence. Also you have to be careful how the note and deed of trust is written, this will determine if they can take 1 home or both homes. I am working with a couple in Indiana who did the same thing but they were givin’ a blanket loan and defaulted on it and now may lose both homes.
Others are correct, get a 1st on the new home. You will have a large equity position and only put the 2nd home at risk if you default…
1) The lender can refuse payments that are delinquent, less than the full amount Due to bring it current or if any other part of the loan agreement is breached including not paying assessments like taxes.
2) the contract you sign (as with all mortgage loans) states that you promise to pay assessments like taxes and associations dues, as well as keep the property covered by adequate homeowners insurance.
3) Yes, if you inherit a property you become liable for the actions on or for the property including paying taxes. If a person slips and falls on the property, the same principal applies
Read your bank note, the court will only grant a foreclosure judgment to a lender when it is proven that the consumer has breached the contract.
Sorry, I did not read all of the post (put in some paragraphs so it is more readable) but I do know your need an Atty versed in Real Estate to figure out if there was fraud involved in all this mess.
I was once in your situation. Don’t worry, everything will work out for you =)
A year ago I found this organization that gives people up to $ 1500 in renter or mortagage assistance! They operate in most US cities, I highly suggest you try to get some of this money.