Using home equity loan to refinance mortgage
I was wonder how common it is to use a 30 year home equity loan to refinance
a mortgage. Specifically I referring to this ad by Bank One:
http://www2.bankone.com/presents/30year/
I've sent in the application, so I suppose I'll hear what they have to say.
It seems like a great idea because they claim there are no fees. I assume
though that the interest rate will be a bit higher. And if I pay off the
mortgage I'll probably be responsible for paying my own taxes and insurance;
I'm not sure if the home equity would have a escrow or not. I'm wonder what
would happen if I missed a payment or two. Could my house be reposed faster
under a home equity loan than a conventional mortgage loan?
I'm just looking for any advice from anyone who is familiar with a 30 year
home equity loan.
I have had loans work both ways...mortgage only, mortgage plus
home equity line, and just a home equity loan (no mortgage).
In one case, the initial loan that I used to buy the property
was a home equity loan (there was no mortgage to start with).
In all of these cases, I never noticed a difference as an end
user. The home equity loans seemed to have fewer fees and
required less paperwork to get the loan.
One difference that I have noticed in loans are some compute
interest on a daily basis. This results in odd effects from
paying your loan payment on different days. For example, if
you make a payment right on time, then make the next one early,
then make the 3rd on time again, the 2nd payment will pay down
more principal (since there was fewer days of interest), and
the 3rd payment will pay down almost no principal (since the
additional number of days results in it being almost all interest).
This makes it very hard to keep track of your balances and
interest paid until you get the statements from the lender.