Should You Use an Equity Line to Buy a Home?

The Miami Herald’s Meg Green, a financial expert and columnist, recently responded to a reader inquiry regarding the use of a home equity line of credit to purchase acreage in North Florida.

Given that we’ve recently touched upon this issue as well, you might be interested in her answer if you are looking to purchase a home or land — be it your first or second residence, or an investment — anytime soon.

Interest rates being what they are, it’s getting expensive to take out a Florida home equity loan. So what should the reader do? Try to ride it out? Take both their mortgage and equity and refinance the whole thing? Is that a worthwhile endeavor?

Let’s assume they owe $104,000 on their Florida mortgage (they have not called for a payoff amount yet) and $69,500 on the equity line. What’s next?

The answer, at least in this professional’s estimation, is that a floating line of credit, i.e. this equity line, is going to continue to get more expensive as the interest rates continue to rise — if not this year, then possibly in the near future.

Therefore, it would be smart, if you’re planning on holding the acreage for the long haul, to fix your expenses. You don’t want to leave this up to chance, especially if you are already battling. That would mean rolling the two loans into one Florida mortgage loan at a fixed rate.

If you take a 30-year mortgage, which will be far more affordable, you can always pay it down faster if your circumstances allow for it. Funny enough, the fixed-rate mortgages are still at low rates. With the current market conditions, it’s time to grab one while you can.