Home equity line vs. Deed of trust with fixed rate

[droe77]

NC

I need to my re-side my home and I've been approved for a home equity line from the company who has my mortgage at prime + 4.25 (8.75%). The company doing the siding work finances through Sallie Mae, and they have offered me financing with a deed of trust at 9.25%. Although its .5% higher, the SLM offer is fixed, and in my eyes, ther's some security in that. Its also got a shorter term (10 years) which means less interest over time.

My question is: Is it safe to go the deed of trust route? I know a decent amount of info about how the home equity line works, but I was wondering if anyone could clue me in on hidden dangers of the Deed of Trust. Either way its a second mortgage, but which is safer?

Thanks!

 

[Ciarraine]

A Deed of Trust is just another term for mortgage. You're essentially asking is it a better deal to do a 10 year fixed mortgage at a higher rate than a variable rate HELOC which will have its own Deed of Trust. Depends on your finances and what you can tolerate for risks.

 

[MortgageGuru]

If you can qualify to get a Home Equity Line of Credit then you can certainly qualify for doing either a fixed rate 2nd mortgage (in the 7-8% range) or you can look at doing a sah out refi for you're 1st mortgage and keep a lower interest rate and payments. Rates are unbelievably good right now. Also, contact a lender that will work for you and not work you over. Those rates sound high for what you are apparantly able to qualify for. As for which is better, a HELOC or fixed rate 2nd, depends on your personal financial situation and what you feel comfortable with paying each month.

 

[droe77]

Thanks for the advice. one other question. Does taking out a second mortgage with a different lender cause problems between myself and the lender that holds my first mortgage?

 

[Ciarraine]

Thanks for the advice. one other question. Does taking out a second mortgage with a different lender cause problems between myself and the lender that holds my first mortgage?

Generally not, unless there's some very peculiar and unusual language in your first trust. If your first mortgage is from a normal bank and not some specialty financing company, 99.9% sure we can say no.