Tl, dr: we get frequent offers from CC [Discovef) to get a house financed loan with no upfront closing costs or fees. But I know nothing about the new regulations and fees. And wasn’t involved in the last ones.
It’s about $30k in debt, most of it high interest on CC when we thought I’d be returning to work quickly. The house is worth ~$300k. We owe about $140k at less than 4% interest. I’m still unable to work.
Several other predictable financial setbacks. Our cars are old. I expect the 2006 Honda will last another 5 years. But the 2010 Prius, with 200k miles is on its last leg. The last time we had an estimate for what “needed” to be fixed it was $2000. Ironically, we got an estimate from the dealership after the last recall that the car is worth $2000. And the engine light came on again today.
We’ve relied on family help past the point of reasonableness.
Geez, now that I’ve told my life story… where do I start? With the VHDA from original loan? Do we take a second mortgage or borrow based on the house? I consider myself pretty internet savvy (but not financially at all!) and clicked on the promoted ad and gave lending tree all the wrong info, except they have my IPO and only fled when the bait site asked for my SS#.
Heavy sigh. So overwhelmed when I just want to be well.
Sorry for the essay and confessional.My husband bought our house as a first time buyer when mortgage rates were less than half they are now. We have medical/CC debt. It’s killing us and we’re almost maxed out. But there’s equity in the house. I handle the finances, and no idea where to start.
Paxton said:
Get a heloc. Pay everything else off. And just pay off the heloc aggressively after.
Can you explain heloc further because what I’ve read isn’t great.
If you refinance the house you’ll pay bank fees and have to jump up to current rates which are dogshit. If you take out the equity you’ll also just lose all that value in the house and have to start all over with a brand new loan with much higher interest rate and payments.
A heloc is a line of credit. It’s all it is. Based on the equity/value of the home. It’ll have an interest rate. And if for some reason you defaulted on that credit limit I’m sure it would have repercussions for the house
But. Never trade equity to pay off short term debt. Worst comes to worst default on your existing credit cards and take the hit to your credit. Keep the house and equity intact
A heloc. Is a line of credit can use for whatever. If you truly have zero income. You’re fucked either way. But. If you have income. Can use the heloc to pay off bills. And then put all your money into the heloc. To satisfy its monthly payment and pay utilities. Other routine bills out of the heloc. It should be a lower interest rate than Credit cards.
be very careful with taking on debt to pay off debt. medical bills by law can’t affect your credit score. can often call and negotiate with a hospital if you’re in financial hard times.
credit cards are unsecured debt. doing some dumbass discover card home loan. maybe tying the house to a debt is beyond stupid. There also is no such thing as a no cost refi (they just roll the cost of the refi into the new loan…so like an idiot you pay interest on the cost of the thing)
with credit cards. in high amts can look into debt consolidation/forgiveness programs. OR worst case scenario just default on them. your credit will take a shit. but who cares you already have a house. there’s no real need for credit.
Or could get a heloc amt for some amt of the equity in the home. Then call up your credit cards or work with a debt consolidation organization. get your credit cards to forgive/lower the debt amts. normally if you can pay a flat …settlement, they’ll lower the debt (there can be tax implications of this, as the lower amt is essentially a gift/income as far as taxes are concerned) but… say that 30k is lowered to 15k. could then stroke a payment of 15k from the heloc funds. …and then slowly pay off the heloc which again. should have a much lower interest rate.
Raine said: @Luca
After googling heloc, how do I decide where to go???
Smaller local banks are probably better for HELOCs. They aren’t super profitable products for banks and the regulations got a little weird after Dodd-Frank so a lot of the big banks (eg Chase) don’t even offer them anymore but smaller banks don’t have the same regulations. Figure was a big player a few years ago too but I’m not sure if they’re still around since their CEO was sort of a sexual predator, but if they are still around that’s a national name to look at.
Raine said: @Luca
After googling heloc, how do I decide where to go???
I had a Heloc with Third Federal and had a good experience. Check with your local credit unions as well.
Another vehicle you should consider is 0% interest credit cards. A lot of them allow you to transfer the balance interest free for 18 months for a small one time fee.
Raine said: @Luca
After googling heloc, how do I decide where to go???
Look up some local credit unions. They may have fixed rate helocs for a short period of time. Our local credit union was at 7.5% fixed for 6 months or 8% for a longer period, which is a lot better than credit card interest rates. But do pay off the heloc aggressively since it’s interest only payments initially.
Raine said: @Luca
After googling heloc, how do I decide where to go???
I would maybe consider a home equity loan instead of a heloc. Heloc’s tend to have a variable interest rate and home equity loans are typically fixed. With good credit, you can get a 20 year home equity loan for around 400 per month for about 50k.
Paxton said:
Get a heloc. Pay everything else off. And just pay off the heloc aggressively after.
I would make a list of all the debt, the monthly payments and at what interest rates. Then go talk to a mortgage professional about what options they have to help tap it equity to pay off your debts.
You’ll likely review two major options - Option 1) REFINANCE - replace the mortgage you have now with a bigger loan at today’s rates. You’ll use the excess loan amount to pay off debt. The rate will be today’s market rate, which is higher than your current rate of <4%. Option 2) Keep first lien as is, and get a 2nd lien (Home Equity Line of Credit or a Home Equity Loan). The HELOC is like a really big credit card, and the Home Equity Loan is more like a baby mortgage. Both the HELOC and HEL will have a higher rate than you have now, and possibly higher than just doing 1 new loan (option 1), but lower than the debt interest you have now. You’ll use the 2nd lien to take out cash to pay off your debt, whilst keeping the <4% loan as is.
Not every lender has the same loan programs. If you are happy with however did the loan last time, I would start there. Then shop around (including a well reviewed mortgage broker if possible) to make sure you find the programs that are the most competitive for you.
Compare the payments that make you the most comfortable, as well as the interest you’ll likely pay in each scenario and hopefully that helps you decide which route to go with. Right now there are so many unknowns which is making this very daunting. What you need are some concrete details based on you and your husband’s actual situation (credit score, income etc).