Ask Terry Questions Taking out a Loan

Taking out a Loan

By Terry Savage on December 23, 2019 | Housing / Real Estate

My husband and I are taking out a home equity loan to buy out his sisters half of a house from their mothers estate.
He believes we should use more of our money and borrow less. He believes that we are borrowing our own money ($25,000 cd). I of course believe we should borrow more and use less of our money. We are borrowing $60,000 and putting in $40,000. He had to sell some stock to come up with some of the money and take other money from the checking and money market act. Which is the better way to go.

Terry Says

Well, you left out a lot of details that would make it easier to answer your question. I have no idea how this fits into your future plans, your ability to retire, fund college for your children etc. But my first question is WHY you want to buy this house? Are you going to sell your home, and live there? Is it a fixer-upper investment project? If the former, then you’d want to borrow less. It would be a good time to lock in a low-rate mortgage if you plan to keep the home for a while. If it’s just a “transaction” then since the loan interest on a home equity loan to do this is not deductible but could be a “cost” if you plan to renovate and sell, then take the home equity loan. But know that rising rates are a risk with this type of financing, over the long run.
Sorry, that’s the best I can do without knowing how much you have in the way of other assets, liquidity, etc — and your needs for cash in the future for other uses.



a personal
finance question