Decision regarding Home Equity Loan - Need Advice

**sk09** · 08-02-2011, 10:31 AM

Hi All,

I have a decision to make on my home equity loan and would appreciate any advice.

I bought a condo in 2006 in orange county, california, put 0% down and got two loans, one a 30 year fixed (300k - 4%) and other a home equity loan (100k - 7%) that matured in 5 years. The property value fell by about 100k over the last 5 years.

Now the home equity loan is maturing soon and the bank is willing to refinance my home equity loan. I also have the money to pay off the 100k home equity loan. But i have a family now and need a bigger home.

Would you pay off the home equity loan and loose the money (home is valued at 100k less now) or refinance the home equity loan and use the money as down payment for second home?

I'm thinking of reducing debt and risk loosing that 100k (hopefully the home values goes back to it's original value someday). Thoughts/Advise?

Thanks!

**Greg** · 08-03-2011, 05:44 AM

Don't count on property values going up any time soon.

If you have to sell to buy another property then refinance the 2nd loan and keep the money to pay off the loan when the time comes to sell the condo seeing as you will be selling at a loss..

If you can carry 2 mortgages then keep the cash for a down payment on the new property.

Normally, I am all in favor of paying down your debt but your situation is different.