Finding the Best Mortgage

The Search for the Best Mortgage

My husband and I are in the process of getting a personal line of credit.

Our credit scores have been affected by maxed out credit cards but we always pay on time and always pay more than the minimum payment.

The line of credit is for $200,000 and our home serves as security interest. They are offering us a rate of 13%.

Does this sound fair?

We would greatly appreciate your guidance.

Mia

This is a high interest rate in today's market. Are you applying for a "home equity line of credit"? If so, it seems the rate they are charging you is too steep.

Your credit score must be low. This is obviously a subprime rate.

I would suggest you shop around more and see if you can get a better rate.

Go to Best Mortgages.

In that article I point out some of the pitfalls you might encounter using a mortgage broker or bank.

Although it has become tougher since the subprime mess began, you should try to shop around and compare deals. This way you can see if you are getting the best rates or not. You will either get offers for better deals or if you don't, you know you are doing well for your circumstances.

In that case, maybe you will should work on improving you credit score before obtaining the loan.

Be sure to cut up the credit cards and close the accounts. If you max out the line of credit at these rates, you will have a monthly payment over $2000. I'm sure your credit card payments are already close to that.

The only reason to refinance is to save money on your outstanding bills by getting a better interest rate and a lower monthly payment. You should save or invest the balance.

Since 13% is not that much lower than many credit card's rates, make sure this makes financial sense for you and that you will establish some discipline in your spending. Do not merely get carried away spending your new line of credit.

I wish you luck.

Thank you so much for responding. I will do some more research but my credit scores are very low.

Our credit card debts total about $15,000 the rest will be invested in a small business that includes the real estate property.

This is why we are looking for this amount and this type of loan. I wonder if it is better to refinance our mortgage and pullout equity?

Our rate in our current mortgage is pretty decent(6.25%).

Thank you for wishing us luck, we will need it.

Mia

Probably the reason your rate is so high is that money is going into a new business venture.

I would try to keep the business financing separate from your personal finances.

Specifically, I would not want to mortgage my house to finance a business. If the business fails, and new ventures do have a high fail rate, you will lose everything.

I would try to get an unsecured line of credit or a SBA guaranteed loan. If you are buying an existing business try to get owner financing.

See if you can raise money other ways.

I hope your new venture prospers and that all your plans work out.