Looking into Refinancing our home..

[brenda67]

we want to cash out any equity we have now so we can consolidate our dept into one payment...I just hope that our house appraises for the amount we will need to payoff our dept..the interest rate will be lower then the one we have now..Please keep us in your thoughts!!

[Wendy99]

pls be careful

[Greebo]

You might not have noticed that we had a housing bubble recently, and it popped.

A huge part of the bubble was people refinancing their homes to cash out equity that, after the pop, did not exist.

Moving consumer debt (B, not P) which is unsecured onto your house, which is secured, is also, quite bluntly, stupid*. Not only will you be taking debt you could bankrupt in a crisis with minimal risk and making it so that you can't eliminate the debt without losing your house, you will also be taking debt which would be paid off in a few years and now won't be paying it off for 30.

If you have $5k in cc debt at 18%, and you pay $100 a month towards it, and never use it again, it will take you 94 months to be rid of your debt. In that time, you will pay
$4,311.18 in interest.

That same $5k at 5.5% over 30 years will cost you TWICE AS MUCH - $8,250 in accumulated interest.

Find a better solution for your financial problems. Like stop using credit cards, sell some stuff, and start buying your future back.
**Please note the use of the word STUPID here. I am not calling *YOU* stupid.

I HAVE DONE WHAT YOU ARE THINKING OF DOING. *I* *I* I* was STUPID to do it.

Don't be a stupid panda like I was.

[Wendy99]

I did the same thing TWO TIMES, thats why I say becareful - not the best idea at all. I will not be doing that again. It's tempting and seems like a good idea at the time, but in the long run .. we are no better off at all ....

[frugalfriend]

I wouldn't do it, Brenda . . . Sorry, but think twice before you do this.

[Mom2-3]

I did the same thing TWO TIMES, thats why I say becareful - not the best idea at all. I will not be doing that again. It's tempting and seems like a good idea at the time, but in the long run .. we are no better off at all ....

I agree and can join the BTDT group It was a young stupid mistake and we ended up back in debt. gasp! Yeah, aren't ya surprised?

OP-please be careful and weigh this decision. If you have any equity, you are among an elite few!

[Russ]

uh, yeah I'm in the group. but if you don't mind me asking.. what is your current rate and what rate will you get?

[Vanilla]

I am also one of those 'BTDT' & back in debt, & am now working very hard on paying off all the cc, then we still have the mortgage to pay off. We are not using the cc anymore.

'Cashing out at re-fi to pay off high-interest cc' was one of the baits the snakes (lenders) use. It's very dangerous to play with those snakes. Be careful.

[a.nonymous]

Moving consumer debt (B, not P) which is unsecured onto your house, which is secured, is also, quite bluntly, stupid*. Not only will you be taking debt you could bankrupt in a crisis with minimal risk and making it so that you can't eliminate the debt without losing your house, you will also be taking debt which would be paid off in a few years and now won't be paying it off for 30.

This is the biggest pitfall. Be very careful.
Don't be too enthusiastic to turn unsecured debt into secured debt.

And if you do, make 100% sure that you'll never use the "freedom found" on your CC card. Ever. Again.
Just close it.

If you have $5k in cc debt at 18%, and you pay $100 a month towards it, and never use it again, it will take you 94 months to be rid of your debt. In that time, you will pay
$4,311.18 in interest.

That same $5k at 5.5% over 30 years will cost you TWICE AS MUCH - $8,250 in accumulated interest.

I'm not a big fan of this calculation Greebo.

This is assuming she'll be paying beyond the minimum payments on the CC, but not on the mortgage if it was rolled into it.
So it's a slightly flawed logic iyam.

[mek42]

If I was the OP, I might have been excited about figuring out a way to reduce payments and interest rates. Then posting this thread gets a little rain on the parade. Brenda, the folks here are giving good advice.

Sometimes our parades need to be rained on.

How about just sitting on the equity application for 90 days, just three short months, and in this time stop using the credit cards and start using the snowball approach.

If you don't have any cash in the bank now, first save up to $500 as a cushion against unexpected expenditures. If you can get to $1,000 in the first 30 days, even better.

Then make only the minimum payments on everything except the smallest balance card. On that card, give it all of your disposable income. Once this one is gone, start on the next smallest balance, etc.

Then, after 90 days, compare your list of debt balances to the one you have now. If it looks like you can get rid of all your debts in a year or two this way, keep working the plan and do it.

There will be some work up front and some lifestyle changes. Written budgets are important, but very, very helpful. Even if the written list of debts looks grim and there's not much left over for debt reduction in the written budget, just having a plan brings peace.

Instead of pulling out your hair wondering how to deal with things, you'll be able to choose in advance what to deal with today and what needs to wait until next week. These may not always be good choices to have to make, but they will be your choices that you can take pride in.

I've only started using a written budget and saving up an emergency savings over the past month. Already it is working wonders. Some car repairs went over my planned for budget. My old way of thinking was to only buy two new tires, putting my wife at risk during her 60 mile work commute. Instead I was able to use the emergency fund to buy all four tires for my wife's car. All this was done in cash and it felt really good.

Many years ago I filed for a Chapter 7 bankruptcy discharge. I reaffirmed my car loan. Everything else other than the student loans went away. Gone, with the wave of a magic wand (or maybe a judge's gavel). I was almost debt-free.

Guess what? I'm in debt again. Even discounting the mortgage, car loan and student loans, I have racked up some more unsecured debt. Maybe not as much as before relative to my income. I also learned enough from the bankruptcy to know that I've been going in the wrong direction and am getting close to a really dangerous debt load.

However, I did not learn the important lesson to just stay out of debt in the first place. I think part of the reason I did not learn this lesson after my bankruptcy is that I did not really have to work to get rid of my debts then. I didn't invest a significant amount of effort in the process. Being made (nearly) debt-free in this manner had very little meaning to me personally.

I am making lifestyle changes to limit my spending and delay my gratifications in order to find the cash to pay off my debts quickly. I believe that these lifestyle changes will prove to be more important over my lifetime than merely paying off my debts.

We don't know you or your situation and you need to make your own decisions. Please consider what we are saying. Many of us have made similar decisions ourselves. Our own similar decisions often proved to be mistakes, leaving us worse off than when we started.

[Greebo]

I'm not a big fan of this calculation Greebo.

This is assuming she'll be paying beyond the minimum payments on the CC, but not on the mortgage if it was rolled into it.
So it's a slightly flawed logic iyam.

You do have a point.

It's impossible without more details - like a complete budget - to do a more accurate prediction.

So I based the CC payment on the minimum payment of month 1 using an interest + 2% basis, and froze the payment.

If I had not frozen the payment, and assumed only paying the minimum on the CC, the time to pay the CC and interest on same would, of course, have been much longer. - 13k of interest and 472 months (40 years).

[Ceashels]

More rain... but my friend consented to her husbands wishes to roll their 30k debt into their mortgage. He then lost his job. Instead of having credit card companies to deal with and still being able to afford their home... they might be losing their home.

Please look at all the other possible options that are out there before you do this.

Greebo and I are upside down on our home. We owe more than it is worth because we did what you are thinking about. We can not sell this house for what we owe on it.

Please be careful.

[Wendy99]

Just curious what you may have decided or what you may be thinking OP .. hopefully you read these replies before you committ ...

[mombottoo]

I'm with those who are suggesting you rethink refinancing. I know that sometimes bills can seem overwhelming, but solving the problem by risking the roof over your head isn't the way to go.

We did this once back in 1994 and due to poor choices & some necessary choices within 3 years we were right back where we were before with a larger mortgage payment to boot. The only good thing was we refied our mortgage from 30 yrs down to 15 and during the 3 year period we paid our mortgage down by 1/2. Then some things happened that enabled us to pay off everything including the mortgage.

They can take your house over a mortgage, they can't over credit card/loans.

[MomToTwoBoys]

We were going to cash out some of the equity in our house with our refinancing because we need the money for repairs. We have about $120k in equity in the house, but the housing prices have been doing the yo-yo thing for a while now.

We decided against it, even with a good economy and stable employment. Why?

First of all, the interest rate would be way higher if we took the refinancing and equity route. We were absolutely dead set on having a rate that was higher than what we have now, especially with rates going up in June. My CC is already experiencing the rise in interest rates (going up 1.5% in June), so when we refinanced, we asked for a rate that's 1/10th of a percent lower than we have now.

Second, we didn't want to tack on another $30k to the mortgage that we'd just paid off. Ugh. I didn't want to look at something like that. What would happen if DH lost his job or we took a huge cut in our tax credits every month? Our budget doesn't afford us that kind of wiggle room. If we'd tacked on another $30k, we'd be paying $900 a month in debt... that's a little less than 1/3rd of our monthly income. No way! If DH lost his job and had to take a pay decrease, we'd never survive. We'd end up selling the house as is and probably wouldn't be able to live in Calgary anymore.