Home Equity Loan
Hi there,
I am trying to figure out if I want to take a home equity loan against my mortgage to pay down some debt and help pay for some upcoming expenses. My townhouse was purchased in 2011 at $160K and is valued at $350K now. I can get a $40 or $60K loan at 8% 15 year loan. I have credit card debt of about $11K and healthcare expenses of $6K. I did just take a new job last week that will hopefully give me a $25K jump in salary and commissions. My oldest daughter is getting married in Europe next year and I wanted to help with the wedding too. This is not my wheel house and don’t know if this is the right way to go. Currently, I have been dipping into my inheritance every year and getting taxed on those distributions, and you see how the market has been. Any guidance would be appreciated! Thank you!
Terry Says
OK, let me start at the end, first.
I can’t understand why you would be taxed on a distribution from an inheritance! Inheritances are distributed tax-FREE to the beneficiary. So please write back to the email you get saying your question has been answered, and give me details on that. If you were the beneficiary of an IRA, it must be distributed within 10 years, so that is the only taxable event, and you cannot avoid it.
So you might as well take that distribution, pay the taxes, and use it to pay down debt and help with the wedding.
A home equity loan might seem attractive, but it is the payment terms that matter.
Is that a fixed rate, guaranteed for 10 years — or does it adust? (Most do!)
And are your affordable monthly payments a combination of principal and interest – or interest-only, leaving you with a big balloon payment at the end?
I can understand wanted to get out of high-rate debt. But don’t jump out of hte frying pay and into the fire!!
