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Question by bug: Can we refinance our home to cover the cost of outside debt?
We are $ 20,000 in debt with health care, credit cards, and student loans. We have $ 70,000 in home equity so far. Could we refinance our home and pay these outside debts?
Best answer:
Answer by just this once
I would just slowly pay off the $ 20,000 loan without taking out a home equity. It’s foolish to put your home in jeopardy over a debt that can be paid off in time. Consolidate credit card bill with the lowest interest. Second pay off the debt yielding the most interest on you as fast as possible.
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| Print article | This entry was posted by admin on May 21, 2012 at 1:00 am, and is filed under Debt Refinance. Follow any responses to this post through RSS 2.0. Both comments and pings are currently closed. |
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about 1 year ago
go for it—rates are low and you can refi for your equity and still pay the same monthly premium—-and get cash for expenditures
about 1 year ago
I would not refinance- If you already have $ 70,000 in equity you have probably been in your home awhile.
A re-fi- would start the amortization all over again, and right now where you are in the position where more money is going to the principal rather than the interest- that will be completely reversed.
Courtney Kostelecky
Founder DebtFreenews.com
about 1 year ago
Courtney K is right, I wouldn’t refinance.
However, if the debt payments are killing you every month and you find no other ways to cut back or raise money, you could refinance the house and use some equity to pay off the debt, but you have to realize that you won’t have that bailout money anymore.
Credit card companies can’t take your house if you stop paying, the bank that holds your mortgage can…
It’s also very important to never get into the same spending habits that got you into whatever credit card debt you have. Many people have racked up CC debt, turned to their home’s equity, felt a sense of accomplishment even though they simply moved the debt around, and then they go right back out and rack up more CC debt. They’ve already taken the equity out of their house so they don’t have that safety net. Sad situation.
But I agree that you should just concentrate on eliminating the debt as fast as you can.
about 1 year ago
With the state of the economy right now, it is difficult to get a home loan. Buying a house to spread out you credit card debt will just cost you more in the long run. You will have an easier time getting the home loan and getting it at a better interest rate if you just pay off the debt first.
Please do not consolidate. It is not free, they will lower your payments by increasing the length of time until you are debt free, and you will take a hit on your credit score. There is a better way.
A. Have a garage sale and sell anything that you no longer need or want.
B.Get a temporary part time job, if you have one, get another. The holidays are coming and there will be plenty of temporary jobs available. It is better to have a no fun year or two than a no fun decade.
Here is a plan that can help you. If you work the plan, the plan will work for you:
1. Make a budget. Make the budget a week before you get paid. A budget is not a punishment! It is a tool which will free you from ever having to worry about money again. Put everything in your budget. Especially those annual, biannual, or quarterly bills like car registration, insurance, etc. Give every dollar you are going to bring home the name of where it is going. Add an “emergency fund” category to your budget for 25 dollars and save up until you have 1000-1250 dollars. Your emergency fund will help keep you from getting into new debt because of an emergency. If you can, set up a direct transfer to a savings account for your emergency fund. That way it moves automatically and you don’t even have to worry about it. You must cut your spending and live on less than you make.
2.First get current on all of you debts and make no more late payments. Stop using your credit cards immediately. Do not take on any more debt. Credit cards are like quicksand only the death is much slower. Make a list of all of your debts in order of highest interest rate to lowest interest. Use cash only for your spending from now on.
3.Pay the minimum due on all of your debts and then put your extra money towards paying off the highest interest one first. After you get that one paid off, you put the money you were paying on debt #1 (the minimum payment and the extra payment) towards debt #2. That will pay debt #2 off faster. When that is paid off, you put all three payments towards card #3 and that one will be paid off pretty quickly. As an example:
To start :
Debt #1 (highest interest): minimum payment+ extra payment
Debt #2 (middle interest): minimum payment
Debt #3(lowest interest): minimum payment
Debt #1: paid off
Debt #2: minimum payment from Debt #1+ Minimum payment from Debt #2 +extra payment
Debt #3: minimum payment
Debt #1: paid off
Debt #2: paid off
Debt #3:Mimimum payment from card #1+ minimum payment from Debt #2+ minimum payment from Debt #3+ extra payment.
That way, you will get them all paid off, on time, and pay the least interest. It will also help towards rebuilding your credit since you will no longer have any late payments. This works no matter how many different debts you may have.
4. After you get all of your debts paid off, add to your emergency fund until you have 6-12 months of income saved up. Put that emergency fund money into a liquid money market fund or into a Bank of America no-risk CD so that if you need the money you can take it out without penalty.
5a. When you have your emergency fund in place, add a category for “fun” to your budget. Save for a holiday, a vacation, a big screen, or dinners out, whatever goal you want. Remember to enjoy your life.
5b. When you have your emergency fund in place, start saving for your retirement. Join the 401(k) plan at work and contribute the maximum. Your employer probably matches at least part of your contribution so why give up free money? Open a Roth IRA and contribute the maximum on a monthly basis. If you start saving for your retirement now, you will probably retire a millionaire.
5c. When you have your emergency fund in place, start saving for your next car. Only buy cars, or other things that depreciate, with cash. Save up for a nicer car. That way you get the interest instead of paying the interest.
You can do it and it isn’t as hard as you think. Just follow the plan.