Home Equity/Line of Credit Questions

iVillage Member
Registered: 07-18-2005
Home Equity/Line of Credit Questions
6
Tue, 07-19-2005 - 11:49am

Can someone tell me do Banks usually give you this if you have equity in your house. I am checking into this and I am afraid becuase of my credit/income to debt ratio I wouldn't be approved. I am talking to a bank right now that isn't my first mortgage bank but I am also talking to them also.

I know my equity I could get up to $14,000 if approved.

I have about $9,000 that I need to use for it that is from credit cards to doctor bills.

I am scared I wouldn't get it. Can anyone shed light on this.

I am a single mother with one income. I think that will be a problem also.

This is what my current situation looks like:

total debt (not including house) - $9,000

income w/ child support per month gross - $2,329.20 but net is about 1,622

monthly bills not counting daycare since that is only in the summer:

cell phone: 42
cable: 40
loan that will be paid off in december hopeuflly: 160
telephone: 90 ($39 per month will be subtracted off in dec)
gas for auto: 80
mortgage: 423
house gas: 60
electric 70
car insurance: 67
my girls lunch during school: 50

I have been paying about $175 per month for Credit Cards

any advice?

iVillage Member
Registered: 02-19-2004
Tue, 07-19-2005 - 12:01pm

What are your credit scores if you know them? That will make a difference in the interest rate you could get. Also, they will charge you closing costs on the new loan. Don't focus only on the monthly payment on the new loan, focus on the interest you will pay and how long you will be in debt under either scenario.

A better and less expensive option is to make sure your credit is in good standing and find a zero interest credit card, or a card with less interest than you are paying. That will save you a lot of money, while a home equity line might cost you more in the long run. It would also drop your monthly payment (although you should want to keep paying as much as you can to get out of debt).

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iVillage Member
Registered: 06-23-2005
Tue, 07-19-2005 - 3:58pm
Credit score, income, expenses are all important things to consider. We are in the middle of refinancing to use the equity in our home to pay down some debt. We have weighed and re-weighed all the factors and for us- refinancing and getting a HELOC was the way to go. It might not make sense to some as a long-term solution, but for us it is going to work out great. I suggest using lendingtree.com as that is how we found the company we are working with (quickenloans.com). We really did our homework in searching out the right plan for our situation. We also checked with Fannie Mae to be sure the company/bank we chose was "reputable". So far, so good. I am very happy with the service we are receiving.
iVillage Member
Registered: 08-28-2004
Tue, 07-19-2005 - 5:31pm
Not that this will solve all your problems, but can you get rid of the land line and just use your cell phone? $90 a month seems like a lot (and even though the price is going down in Dec. it would still be nice to have the extra $).
iVillage Member
Registered: 08-19-2003
Tue, 07-19-2005 - 9:44pm

I personally think you have a good budget now with about $300 a month left over. Its not much but its more then I have after our fixed bills, so I know its workable.

I would never trade my homes equity to pay off unsecured debt. I think its a bad idea all the way around. If you challenge your self and commit to getting out of debt you could have this $9000, paid off in a few years, refinancing your house to pay the debts will be way more money in interest and 30 years to pay off.

GO to the library and borrow Dave Ramsey's book "Total Money Makeover".

Get rid of any extras, plan your meals, pack lunches. When the loan $160 & the phone credit $39 is not owed, take thatamount and start snowballing your debt. If you keep rolling your payments through all your debts first unsecured, and then your home, you could be debt free in 15 years, or whatever. Lets put it this way, a whole lot sooner then the home equity.

You can do this!

(let me also say that we have done an home equity to pay off debt in the past, I regret it. Two years later we were back in debt..This time we are doing it the correct way!)

Shannon


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iVillage Member
Registered: 07-24-1997
Wed, 07-20-2005 - 1:15pm

I would be leery of using a HELOC to pay off unsecured debt that you are already capable of paying off. Secured debt is still debt - the difference is that now you can lose your house! Additionally, if you have no savings, the equity in your home may be your sole cushion against disaster.

Kelly

iVillage Member
Registered: 05-30-2003
Thu, 07-21-2005 - 7:06pm

I agree! Another Dave Ramsey book that has more of the 'nuts and bolts' is "Financial Peace Revisited."

Although it is sooooo tempting to roll the unsecured into a HELOC, it's not as good a deal as it looks. You're trading unsecured for "if you're late, we come and take your house" debt.

Getting out of debt isn't always fun or easy, but you can do it!

Lisa