Refinance Question - Lurker...

iVillage Member
Registered: 03-31-2003
Refinance Question - Lurker...
3
Mon, 06-09-2003 - 7:59pm
I don't usually post to this board, I am usually over at parenting...But, wanted to ask a question and thought maybe someone would be able to help. My DH and I are thinking of refinancing our house which we have owned for 1 1/2 yrs. We got a really good price on the house, due to the couple we purchased it from getting a divorce. Our credit was not perfect when we brought, and the interest we are paying is 7%. We are ready to sign papers that would refinace the house and allow us to take an additional $10,000 to pay all credit cards and one student loan. But, if we go for the fixed rate we can only get 6.50%...If we go with the 2 year fixed, then adjustable after that, then we can get 6.25% - Any suggestions????
Avatar for cl_phocid
iVillage Member
Registered: 03-26-2003
Mon, 06-09-2003 - 9:13pm
This is a great question for the Real Life Real Estate Board: http://messageboards.ivillage.com/iv-mlrealestate

I think one of the cl's there is a mortgage broker and can help you understand whether or not the rate makes sense based on how long you plan to be in the house.

Generally speaking, I only believe in taking money out of a home in order to invest it back into the home to improve property value. It makes me nervous when people take money out of a house in order to pay unsecured debt - because they then secure the debt with the house. Most people also charge their cards right back up within 3 years, thus creating a cycle where they never have lots of equity in their home.

HTH

Danni

All my best,
Danni

iVillage Member
Registered: 08-14-2002
Mon, 06-09-2003 - 10:34pm
There is, for some people, good sense in refinancing a house to pay off unsecured debt - IF IF IF the people don't charge those cards right back up again! The good sense is because mortgage insurance is tax-deductible, but CC debt is not. If you refinance your CC balances into your home mortgage, then you get to take that interest off your taxes. Makes perfect sense to me.

Someone please correct me if I'm wrong - don't want to give someone a good idea about a bad move.

Msfit

                  &nbs

Avatar for cl_phocid
iVillage Member
Registered: 03-26-2003
Tue, 06-10-2003 - 1:02pm
I generally disagree with this tactic because people are taking unsecured debt and securing the debt with their home. If something awful happens (unemployment, disability, whatever) - you can always discharge unsecured debt in a bankruptcy. If you can't make your house payment, then the house is taken away.

I don't believe that *anyone* plans to pay off cc debt with equity and then merrily charge cards back up again - I think it just happens, slowly, over a period of years - mostly because paying them off was so easy rather than a long, arduous struggle that often changes attitudes toward debt forever.

Danni

All my best,
Danni