Understanding financing - Home Equity Loan

2 Replies

Could use some assistance with understanding financing:

I am looking to understand how a short term home equity loan would work...I recently went to the bank to ask about it, but want to understand the numbers. I own a rental property free and clear and am want to pull out 25,000 for repairs in order to flip it. 

Purchase price: 51,000

Looking to borrow: 25000

Months: 12 w/ balloon after 12 months 

Interest rate: 5.5%

I'm mostly interested in understanding how much my payment each month would be. Also, understanding principle vs interest and how that is calculated. I'd appreciate any help you guys could offer!

Thanks, 

Adam

Originally posted by @Adam Garza :

Could use some assistance with understanding financing:

I am looking to understand how a short term home equity loan would work...I recently went to the bank to ask about it, but want to understand the numbers. I own a rental property free and clear and am want to pull out 25,000 for repairs in order to flip it. 

Purchase price: 51,000

Looking to borrow: 25000

Months: 12 w/ balloon after 12 months 

Interest rate: 5.5%

I'm mostly interested in understanding how much my payment each month would be. Also, understanding principle vs interest and how that is calculated. I'd appreciate any help you guys could offer!

Thanks, 

Adam

 Most HELOCs are interest only, so the payment is simply (balance * rate / 12). 

$25k * 5.5% / 12 = $114.58. If you want anything to go towards paying the balance down, you have to pay extra.

But really this is a sufficiently basic question that you should be asking your lender. :)

Thanks Chris. I appreciate your help. 

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