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Need to make some decisions

May 23rd, 2022 at 01:41 am

We have an opporunity to refinance our house, using our equity to pay off every single cent of debt we owe (except my studen loan). I know it's not the best market to refi right now, since rates have gone up like crazy... but we have about 130K in debt (need to update side bar), and it will take us forever to pay off using the snowball method. 

I am very aware that putting all of our eggs in one basket could be scary for us. My mortgage right now is $1785, it would go up to $3100. But my MINIMUM payments alone are more than the difference. 

If we do this, we have to 1000000% change our ways. No more debt, no more credit cards. If we do this, we have to pay $1500 a month extra on the mortgage (we plan to stay here for at least the next 10 years), and look to refinance to a 15 year when the market calms down (2 years?!). 

All our bills are paid every month... we can afford either scenario. Both have dumb tax tied to them, but one allows us to speed up the process. And honestly, lowering the sheer number of bills we pay each month, will be REALLY nice. 

I am looking into one other scenario, a seperate HE Loan. Hopefully will have #s to compare tomorrow.



10 Responses to “Need to make some decisions”

  1. Lots of ideas Says:

    I think you have to look at how you accumulated the debt, and how you can be sure you won’t simply accumulate it again if you move it to your mortgage.

    If it was because you had one time expenses, like medical when you didn’t have insurance, then maybe this is a good strategy.

    But if it was that your living expenses are more than your income, you have an addiction like shopping, gambling, drugs, alcohol, then you are just setting yourself up to lose your house.

    If you can confidently cut up your credit cards and live on the amount you make, then maybe this makes sense.

    But you know the truth of your situation - if you don’t have a budget based on the past 6-12 months actual expenses you need one.

    Remember too that housing values are very high right now. If the market drops, you can end up upside down in your house and if you had to sell, you ptobably couldn’t and would end up in bankruptcy.

    Proceed very cautiously.

  2. AnotherReader Says:

    You need self discipline, not a refinance. Unsecured debt can be discharged or forgiven. Do the Dave Ramsey approach. Without discipline, you will fail and the smallest hiccup will cost you your house.

  3. AnotherReader Says:

    What happened to your plan to use the sign on bonus to pay off the Tundra?

  4. Amber Says:

    Please forgive me if my comment sounds a bit harsh, that’s not my intentions.

    With that being said, I think this is a bad idea. Though I’ll admit I don’t know your entire situation but the thought of putting/adding your debt to your home, in my opinion is a huge mistake. You can not pay your credit cards, this will go on your credit but not being able to pay your mortgage means eviction.

    If you haven’t gotten a grasp on your spending or know why you’ve accumulated the debt, I’d stay far away from this.

    Like you I had over $100k in debt, not including my house. I think 30k of that was credit cards and about 90k in student loans. I put myself on a very strict budget. It was hard, I’ll admit; however, I now have no credit card debt and got my student loans almost to half. While working the steps I gave my best friend my credit cards and told her to only give to me if the house was burning down. She held true and kept those cards for about two years.

    You can do it, it’s going to take hard work but you can do it.

  5. latestart Says:

    If you refinance, will you have any equity in your home? I would be very afraid of owing more than my house is worth. Will you be able not to use credit cards? I would proceed with caution.

  6. mumof2 Says:

    Yes I was wondering what has been paid off since feb when you said you were going to pay off the tundra....if I was in your position I would cut up CC and just pay minimum on all bills and work on paying off 1 bill once that one is paid work on the next one...yes will take some time...but if something happens you could lose your house...then what...get a budget written up and stick to it and before you know it the bills will be coming down and disappearing in no time

  7. crazyliblady Says:

    I, like Amber, would say this is not a good idea. If something happens that causes you to not be able to pay your mortgage, you could be evicted. And if 2020 taught us anything, it is that that can happen. I would take a serious look at your spending -- not what you remember spending, but look at receipts, paid bills, etc. You may be spending a lot on something you could redirect to your student loans or mortgage.

    Have you looked at whether you are eligible for any of the student loan forgiveness programs? Or how about refinancing your student loan?

    Do you have any emergency savings? If you don't, you could easily be in a world of hurt if something goes wrong.

  8. crazyliblady Says:

    I forgot about this question earlier. Is the rate on this refinance an ARM or fixed? It makes a big difference. If you have an ARM and the rate changes, your payment changes, so be sure you know what you are agreeing to and the consequences.

  9. LivingAlmostLarge Says:

    what rate do you have now? Rates are so much higher it might not be worth it. Maybe a HELOC instead but then you are just consolidating. I am so glad to her you paid off the tundra. And you owe $43k or $43 left on the jeep?

  10. CreditRules Says:

    Maybe a middle-ground approach would be to do a 2-year trial of changing your ways. You're planning to re-finance again in 2 years or so anyway. So see if you can stay on the straight-and-narrow for 2 years, cutting expenses and throwing all that money at your debts. Than re-evaluate the plan. It might also help to post your income and budget in the forums, if you're willing to get some straight talk and wet noodles about your expenditures.

    Full disclosure, I don't think you should do this in 2 years either, but at least a cooling-off period might help you see if you will really be able to change your ways.

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