I was checking a credit union's website and they offer a "first lien loan" to replace an existing mortgage (link). I'm planning on calling tomorrow, but in the meantime what are the pitfalls of this product? I'm not finding any: I can take out this loan to pay off the existing mortgage and choose my repayment term in 1-year increments and at a lower interest rate (2.49% vs 3.125%) and there are no costs to open it.
With this product, I could bring my payment term down to 6 years and save $6k in interest while keeping roughly the same payment ($100 more). Am I missing anything?
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posted: Sep. 5, 2016 @ 8:56a
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Senior Member - 10K
posted: Sep. 5, 2016 @ 9:23a
The biggest pitfall seems to be that they are a small credit union operating in one county in PA. I'd suspect they also limit their lending to that county as well. If you live there, it seems like a pretty good product.
2.25% for 5 years and no costs is pretty great. You probably can't have a home equity loan along with this product because it already is one. If you're fine with that and your house is in Bucks County PA I would go for it
Glitch99 said: How can they enforce you not getting a second lien behind theirs? Isn't the point of a first lien that you are first in line to get paid in full, no matter how many additional liens there may be?
Exactly. A lender can't restrict you granting a second or third or fourth position to another creditor.
This looks like a great product for someone with a small balance remaining on their loan. It is basically a home equity loan like many lenders offer, except that there is a lower rate because of the requirement that the lender be in first position. There aren't a lot of lenders out there offering any preferential treatment for a home equity loan in first position.
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