I know very little about HELOC's, since we're actually building our first house, but I think these would be some of the important differences: - Rates, that depends, I'd ask about both before making any decisions - HELOC should have lower fees and definitely less formality - Construction loan, these are interest-only and the interest is tax deductible (assuming the new house will be your primary residence). The bank should require inspectors for each draw on loan (and you only pay interest on money that has been drawn). This is nice b/c you incidentally get another house inspector as part of the loan. This will help avoid some of the other horror stories on this site where the builder just keeps asking for money. The builder will instead have to go to the bank and request an inspection for a draw. In terms of formality, you'll need to actually go over the building plans and builder's contract with the bank before they approve your loan. They'll have an appraiser make sure the house isn't costing too much, etc. That oversight is nice, but it could be irritating if you know what you want and they disagree. You'll also pay for that all their work stuff in the fees attached to the loan. I suppose you could simulate the draw schedule of a construction loan with a HELOC and careful inspection on your part (or a third party that acts as an inspector). We have a construction loan through a local bank and it's worked very well so far. It's nice when you're building to know that a bank also wants to make sure the house build goes well so that their loan works out.

Are we getting the horse a bit back of the cart, here, possibly? Have you bought your house yet? I assume not, in that you don't have mortgage set up, it appears. I'm not familiar with the housing situation generally, and certainly not with what's going on in your area, but the housing situation in many parts of the U.S. is in a real mess. Many bought several years ago, with small equity, and paying something like 1.5% interest directly at the time, but the actual amount being charged was much higher, say, 6% ...with the extra being added to the principal owing! The contract specifying that the rates were to be renegotiated after a certain number of years. When the amount that the mortgagees actually needed to pay became apparent on renegotiation ... the people couldn't pay it. So the house went on the market. Along with thousands of others in the same boat. Those (what many of us would call "spurious") mortgages were peddled over wide areas. Including to a Canadian bank in which I've held shares for 41 years, during which time share price advanced from $4.20 to about $106. and change, last May. Unfortunately, it seems that my bank had also backed an insurance company that had underwritten many of those lousy mortgages. As you know, North American stock markets are down a substantial amount during the last few months - but nothing like more than 40%! You can understand my feeling that I'd more or less like to use those guys who dreamed up that shady way of doing business as targets at a shooting range? The speed at which the Fed began freeing up money when this problem surfaced a while ago, and has moved on it again since, including today, in concert with the Canadian central bank, and some European ones the same, leads me to think that there's a lot more trouble yet to appear in the housing crisis in the U.S. Remember the Savings and Loan crisis of something like 30 years ago? Some are opining that this may turn out to be worse. If I were you, and it's at all convenient, I think that I'd be sitting on my money for a while. By the time house prices get down about as low as they may be about to go ... ... perhaps you'll have had the opportunity to have saved most of that $30,000. shortage, especially if you go into fairly heavy-duty savings mode in the meantime ... ... in which case - perhaps your problem may well have disappeared. Maybe more than disappeared ... for possibly the house you want may have had its price dropped by that $30,000. ... possibly more? And you may well have more than the "extra" $30,000. on hand ... ... Hey! maybe you can have enough extra down payment to be able to avoid mortgage insurance! The loss in value of that stock of mine since last May is about half of the amount that you're short. But I've held it for 41 years, so I guess I'm more or less too much attached to it to sell it now (and this is not the time to sell it, in any case - might be time to buy more). Just some food for thought. My daughter's wanting to buy housing in the Phoenix area. I've been suggesting to her for months that she keep her money in her jeans for a while. She made an offer last year, there was $5,000. difference, with neither stubbornly willing to spring for the diff. Within a few months, after she returned to her former location in Toronto ... ... she told me that a re-valuation of the premises had come in ... ... at $20,000. lower. Now she's back in Scottsdale, keeping her eye on the situation. Maybe even both eyes, on occasion? Sitting on her money ... still (I hope). I hope that you're having a great old week, at your "house" - (wherever that may be, at the moment!). ole joyful P.S. I'm not as upset as it sounds - when dealing with much of business in general, and the stock market, in particular, if one were to sweat the small stuff (or take a short-term view) ... ... one would have one's fingernails chewed down to bleeding, a good share of the time. Closing on age 80, very thankful to be enjoying good health, with only a small portion of needed health care payable directly, and fairly sure that I have sufficient assets to carry me through the remaining days of life ... ... with some residue for charities and offspring ... ... I'm a happy man! o j P.P.S. For many families, buying their home is the largest contract that they ever make. I strongly suggest that you make it your business to investigate the current housing crisis in the U.S. thoroughly, up, down and sideways, during the coming months, including prospects in your area. There may be a hurricane approaching. o j

I have a girlfriend who is a real estate agent. She told us that refinancing is basically a scam because there are so many fees involved. We were trying to decide whether to continue investing in mutual funds in this iffy market or pay off the mortgage, so we saw our financial advisor in January. He said that since the market is just as likely to go down as to go up, we would be safer paying off the mortgage, but if we buy mutual funds, we are buying at a low price, which is a good thing. So we are doing 50 -50, investing and paying down the mortgage. It feels SO good to be paying off the mortgage. Will be done in two years or less, and we brought the house in 1992. (Didn't start adding to the principal until two years ago.) I would not take cash out, nor would I refinance. The whole point is to pay off the mortgage, not make it last forever. Taking money out to invest might have made sense in the 90s when the market was booming, but not now. Everyone should manage their finances as if they might lose their job next month. I have NEVER made car payments, so I agree with landmarker, you should have been saving for a new/replacement car. If you don't have the ready cash to buy a new car, I agree that you should buy a used car. You obviously know enough about cars (Congratulations!) to be able to pick a good one. Buy a used car, pay it down as fast as you can, then go back to paying down your mortgage principal but also save for the next replacement car. You know what they say - the value of a new car drops as soon as you drive it off the lot.

The first thing that you need to understand is that the bank did not put the asking price on the house. THey may not take "ANY" of the offers. You said you were offering a full cash offer, but then you mention a loan application. Don't bother applying for anything. Your mortgage application most likely will expire before you get an answer from the bank on whether or not they will accept your offer. I stopped showing short sales months ago. My buyer was a cash offer for $315000 on a house that was listed for $345,000 if I remember correctly. The house had been on the market for 2 years with no offers. After 5 months and no answer from the bank, they bought something else. The house still sits there.