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Author: CatherineCoy Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 127684  
Subject: Re: Help me w/ my house budget Date: 1/27/2002 1:44 PM
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I think you need SOME equity in your home, at least to borrow against it in times of emergencies, and to get you payments to a reasonable level.


One can borrow equity in times of need, but any equity over 80% LTV is more expensive to borrow.

For instance, if you have 30% equity in your home right now, you can borrow 10% of it at 4.75% (prime).

If you have 80% equity in your home right now, you can borrow 10% of it at prime + 1.875%--still relatively cheap--or the entire 20% at prime + [whatever you can find].

In other words, the more you juice your property, the riskier it is for the lender to lend it to you, thus the higher the interest rate and the more stringent the approval requirements.

Personally, I believe that everyone should put a HELOC (Home Equity Line of Credit) in place BEFORE they need it for the emergencies that Merrill is referring to. It usually costs nothing to put it in place if you know where to shop for one.

Catherine Coy
Mortgage Broker
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