Posted on: 18th Jul, 2011 01:42 am
i'm in a fix and don't know which option to chose - refinance, second mortgage or heloc. i wanted to go for heloc but one of my friends suggested that it will have a negative impact on your credit score. is it true?
Hi Garry,
A HELOC will have a negative affect your credit score only if you are using a large portion of your total line. HELOC is similar to credit cards, where there is a balance and a maximum balance. The ratio of the first to the second is used as a measure of financial strength. Thus, a HELOC taken out for the full amount at the beginning will negatively affect the score at the outset. If you pay down over time, the score will rise.
However, in my opinion, if you have equity in your property, then it will be better to refinance your existing loan. This will help you in getting better rates and you will remain liable for one monthly payment toward the loan.
Thanks,
Jerry
A HELOC will have a negative affect your credit score only if you are using a large portion of your total line. HELOC is similar to credit cards, where there is a balance and a maximum balance. The ratio of the first to the second is used as a measure of financial strength. Thus, a HELOC taken out for the full amount at the beginning will negatively affect the score at the outset. If you pay down over time, the score will rise.
However, in my opinion, if you have equity in your property, then it will be better to refinance your existing loan. This will help you in getting better rates and you will remain liable for one monthly payment toward the loan.
Thanks,
Jerry
I suggest that your decision should not be based in any way on what may or may not happen to your credit score. If you have good credit, your credit will still be good after you get any one of the three choices.
Your decison should be based on what makes the most financial sense.
You have not provided any information, so we can not advise whether first mortgage refinance or fixed rate second or second mortgage HELOC might make the most financial sense.
Your decison should be based on what makes the most financial sense.
You have not provided any information, so we can not advise whether first mortgage refinance or fixed rate second or second mortgage HELOC might make the most financial sense.
