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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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.
posted: Sep. 5, 2016 @ 10:44a
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
posted: Sep. 5, 2016 @ 12:37p
Closed end, so good as as long you on stay in the home for the duration of the loan and don't plan on prepaying. If not, be prepared to pay fees.
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?
posted: Sep. 6, 2016 @ 8:56a
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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