My mom has a home equity loan taken out in 11/2007, which has a balance of $ 32428 now with zero interest. The load will convert to a standard home loan, 15 year mortgage on 11/2017, approx 2 years from now. Her monthly payments are interest only of $96 per month. In 2017, the loans interest, I will assume will be 4.8%. My question, should she just continue to pay, interest only until the loan converts in 2017, ( btw, she is 68 years old) or should she pay $300 per month ( $96 for interest, $204 for principal, to drawdown the principal). What is the most advantageous route to take? Thanks,
%%%%%%%%%%%%%%%%%% MI; Interest only is a great idea for banks; but since people tend to live longer, pay it off asap. I remember I asked my old fashioned banker friend/officer, back during the REAL estate UPtrend; what about an interest only loan????? [We did mostly pay it down, low down pay RE; community conservative bank] Banker was such a good friend he got mad @ my ''interest only'' question!! Very few bankers will be that good a friend. That' s Wisdom ; not a prediction..................................................................You're welcome.
Please correct me if I am wrong: there is 2 more years left before the home equity loan converts to a conventional loan, current balance is 32428. If you pay 200 on principal every month you will have payed 2400 in the next 2 years, and the balance will have dropped to 30028. The loan will then convert to a 15 year conventional at 4.89% per year, the payments will be 235 per month, and total interest for 15 years will be 12405. Now if you don't pay on the principal at 200 per month for next years, the balance will stay at 32428, the monthly payments at conversion will be 254, and total interest will be 13397, a difference of 992 over 15 years. So if you pay down principal for next 2 years by 2400$ you will be out 2400 of cash for a savings of 992$ over 15 years, and considering my mom's age of 68 and questionable health, my suggestion would to save the 2400 in principal payments, she might need the cash, and she is only saving 992 over 15 years in interest. So I need an opinion, is my analysis faulty?
---------------------------------------------------------------------------------------------------------- So for the home equity loan is this (interest only) loan from 2007? For 7 years do your mom (only) pay just interest of the $96.00? If your mom do that then she still have all the principal to pay with interest + principal for the 15 year mortgage coming in 2017. What equity in the house? If your mom try to sell today will she have the negative equity?