Financial question

[Serena]

Would you remortgage your home to pay off the credit card bills?

What would be some things you would think about before doing so, and/or why wouldn't you?

 

[bsnyder]

This can be a very savvy financial move IF one has the discipline not to run up the credit card debt again.

But, I have to say, as a banker, I saw many a customer who had that intention, and then did the opposite.

 

[Christine]

Yes, I would under some circumstances. BUT, you should have a LOT of equity in your home so that whatever you cash out is not using ALL of your equity. Also, I would make sure that I could get the BEST interest rate possible and the lowest closing costs. If you can't get the best deal there, then don't do it.

I was thinking of consolidating my car loan and HELOC, but I was getting absolutely swindled in closing costs so I dropped the deal. I know I can do better with a bit more time.

Additionally, cut up the credit cards after you do that.

And one more thing, try to transfer all your credit debt to 0% interest cards before you refinance. My cousin managed to pay off $25,000 worth of credit card debt by doing this. She just kept transferring to these cards (they usually give you 0% for a year). Worked very well for her.

 

[Tanuki]

A mortgage is "secured" debt. If you fail to make the payments they foreclose on your house and put you on the street

In some cases the lender may keep the entire proceeds from the sale of the home even if it greatly exceeds the outstanding debt.

This happens in Georgia. It's perfectly legal here.

So be sure to read the fine print. You don't want to lose fifty thousand worth of equity in your home over a five thousand credit card debt.

 

[Serena]

Hmm, thanks all. I'm worried about risking my home over credit cards too. If I can get a loan without risking my home, I will.

 

[Serena]

Oh, any websites I should be looking at?

 

[Serena]

oopss

 

[Nancy]

We did a home equity loan to do this a long time ago. It worked for us...BUT you have to get rid of those cards. If you pay them off and then start charging again, you'll be in a bigger hole then you were before.

 

[C.Ann]

I would not make an "unsecured" debt a "secured" debt by doing so..

How about some sort of consolidation loan (if you can find one with a lower interest rate than the credit cards) and then trying to make a little larger monthly payment on it than necessary?

 

[Crankyshank]

I took out a HE loan last year to do that.

We still use our credit cards, but have a rule that it needs to be paid off within 90 days. We've had some pretty huge projects going on or it would be within 30 days pay off

 

[chrissyk]

We did this when we were in our early 20's. We had already long since stopped running up the cc's, but the interest rates were killing our payoff plan. We took out an equity loan and paid off the cc's, and we've never carried a balance on the cc's again since. I would never have done this if we were still at risk of running up a balance, though. We reformed our spending first, and THEN took out the equity loan. We were able to pay off the equity loan very quickly after that, thanks to the much lower interest rate.

One thing that I wish that I'd checked into was the fee to close out the equity loan once it was paid off, though. We had to pay like $150 to close the loan if memory serves me. This was back-in-the-day before everyone and their mother was offering low-interest mortgages and equity loans, though...things might have changed since then.

 

[Serena]

consolidation loan Hmm. that's the term I was thinking of.

But, I do have to refinance my home soon to get my ex's name off the mortgage. I do have a lot of equity in my home, it's almost paid off. I don't want to touch that if I can help it.

Where would I go to find consolidation loans, any good website to compare?

 

[bsnyder]

consolidation loan Hmm. that's the term I was thinking of.

But, I do have to refinance my home soon to get my ex's name off the mortgage. I do have a lot of equity in my home, it's almost paid off. I don't want to touch that if I can help it.

Where would I go to find consolidation loans, any good website to compare?

Laurie, if you have to refinance the home anyway, I'd do a cash out refi and pay off the credit card debt, not do two separate loans. You'll have to pay closing costs and other fees on both loans.

I advised people to close all their revolving credit accounts and keep just one for emergency purposes only, if they are worried they'll give in to impulsive spending.

 

[C.Ann]

consolidation loan Hmm. that's the term I was thinking of.

But, I do have to refinance my home soon to get my ex's name off the mortgage. I do have a lot of equity in my home, it's almost paid off. I don't want to touch that if I can help it.

Where would I go to find consolidation loans, any good website to compare?

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I would stick with reliable local banks and/or credit unions.. Many local banks have web sites now.. Look them up in the phone book (local credit unions too) and they often have their web sites listed..

If your house is almost paid off, you really don't want to mess with that unless there is NO other way..

 

[bsnyder]

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If your house is almost paid off, you really don't want to mess with that unless there is NO other way..

Sorry, but I have to respectfully disagree. If the house is almost paid off that implies there is plenty of equity. Unless we're talking about a massive amount of CC debt, it makes no sense to spend the money to take out two separate loans.

 

[Serena]

Bet, I think that it does make sense to just have one loan. I hadn't been thinking of it that way.
I'll just have to be really careful. I have had a few more expenses in the last year that I wasn't prepared for. I think a bigger emergency fund is in order.

 

[aprincessmom]

I wouldn't do it. I would use strict budgeting coupled with taking out a consolidation loan to pay it off. I wouldn't risk my house.

 

[toto2]

I know nothing about finances...but I first would cut my credit cards...

 

[mrsltg]

Firstly, you're not really risking your house. In order to have a foreclosure that results in the sheriff removing you, you have to stop paying for a LONG time. You state that your house is almost paid off. Essentially you would have to remortgage the entire house at what it's worth today to be in danger of loosing it. Look for a mortgage that has no prepayment penalties. This means that you can payoff the loan early without being charged a penalty fee (which is usally in the thousands). Shop around for a good rate and a good closing costs. Finally, the interest in a mortgage can be written off, consumer credit interest cannot. The wise decision is to re-fi, and stop using the credit cards. Use either your debit card or an American Express which guarantees payment every month.

Good luck!
Erin