Seeking Financial Security

Updated on November 01, 2006
H.L. asks from Crown Point, IN
11 answers

I'm trying to figure out if it is in our best interest to refinance our home, which we bought 4 years ago in northwest indiana. We have a fixer-upper which we have put some work into, but with the kids not as much as we'd have liked (I'm very goal oriented). Other homes in our area of the same size and built around the same year in worse condition are selling at about $60-75k above what we paid for our house 4 years ago with asking prices now soaring to $100k above. Do we refinance and get out of credit card debt? Or am I not considering everything I need to? If anyone has gone through something similar, I'd love to hear your input.

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So What Happened?

We spent the entire day on the phone yesterday talking with the bank and credit card reps & I think it was worth it. I felt much more prepared for the discussions thanks to everyone's input and some research of my own. Nothing is finalized and I will compare the paperwork they send with several other banks before we sign on the dotted line to be sure we really got the best deal.

By the way, the Suze Orman site I was referred to is absolutely excellent! She has a link for 3 free credit reports so I knew how to convince a rep to lower my interest rate because I pay on time and there is no inaccurate info in my file. Another had the rate so high, I told them that was it was going to transfer the entire balance to a 0% card I opened yesterday. The TransUnion site (linked indirectly from S.Orman) has a household budget & another document on creating a spending plan that we found helpful. We probably wouldn't have found this info without the mamas.

Thanks also for the tips on cleaning up the house---we will be having another walk through soon to find out how much the house is actually worth now. I'm excited about the weeks to come and the projects that lie ahead for our little family. Thanks to everyone who took the time to respond to our request.

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T.H.

answers from Chicago on

I can refer you to a financial advisor who we use to help answer any financial questions you have. If you want her name and number, give me an email at [email protected]____.com.

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E.W.

answers from Chicago on

I just went through this. When my husband and I first "consolidated" our bills to pay off and found out how much we were truly in debt and how much interest we were paying on our credit cards (some as high as 24%), we went to our Financial Adviser and asked what he thought. We refinanced early last year, and the rates now are higher than what our current rate was. His suggestion was, since we were not looking to move for another 3-5 years, was to take out a home equity loan. As long as it is paid off by the time you go to sell, it doesn't hurt the equity you've established in the home.
My advise: go with the home equity loan - make sure to shop around though (our mortgage company wanted to charge us 10.5%, where as our bank only wanted to charge 8%-a big difference in the end). This will free up a lot of money for you to be able to do some more things with the kids, or some of the renovations you want, or just plain save for later.

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H.C.

answers from Chicago on

Without going into specifics and just looking at the basics, you have to look at the interest rates that you are being charged for any kind of debt that you have. Once you figure out where you're paying the highest interest rate, take care of that debt first. It's simply your best use of money.

I have found that Suze Orman's site is a great source of information. Here's the link: http://www.suzeorman.com/

MSN's MoneyCentral is another great source: http://moneycentral.msn.com/home.asp

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G.

answers from Chicago on

Hi H.. I'm a CPA and somehow could relate to your dilemma. You don't really have to pour in money to fix your home if not necessary. If you're planning to sell it, just make the needed touches - new paint, etc. Your real estate could help you more on this. Also don't make the mistake of renovating your house that its market value soars a lot higher than those in your neighborhood. You'll have a harder time selling it unless you sell it at the going rate in your neighborhood. As to refinancing and paying off your credit card debts, it's a good idea. This is necessary if you have a higher interest rate than what you could get. However, if you simply need cash to pay off your debts, an equity loan would be a better answer. Just make sure, you don't get charged for any costs, get the best rate and truly pay off your credit cards. Don't make a mistake of spending it elsewhere or you'll end up with having more debts. Finally, this option would also give you more tax breaks - the interests from the equity loan are tax deductible. I hope I answered your question.

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K.B.

answers from Chicago on

Hi here is my 2 cents.

I always heard that it's not the best thing to do. Just remember you are putting your house on the line for bills. If you cannot pay your credit cards you will still have a house. If something happens and you CANNOT make payments on the equity loan you could be screwed! You might be better off finding a credit card or non secure loan to take out. Sometimes you can find low interest rates and have a set payment for a few years. We have done it both ways once on our house YIKES! And via credit loan. Just remember if you don't cut up those cards you will make even a bigger debt. Make sure prior to making your decision that you start your budget so you do not start running up credit again!!! I learned from my mistakes!

Good Luck!

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V.G.

answers from Chicago on

HI H., My hubby is into financial market and is a VP in citigroup company. He and his team do FNA Financial needs analysis for middle income Americans. You can call him (Sumeet) at ###-###-####. The FNA will be free of cost for mamasource Mom's

Best of luck

Regards
V.

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C.M.

answers from Chicago on

My mother is going through the same thing. I spoke with a mortgage counselor and she suggested, depending on the finance rate, is whether you should refinance or not. If you have a good rate, do not do anything, the rates are going up. If not then try to get the best rate. If you have a nice rate, then try really hard to fix up the home and work on your credit card debt yourself. Refinancing only makes it longer before you are able to pay the house off. The more equity you have the better, if you have to sell. I think you should not refinance. You may want to look into a equity loan vs refinancing to pay off your credit card. I am not sure how the loan works but look into it. I wish you luck.

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D.B.

answers from Chicago on

H.
I know what your going through.Iam waiting for the interest rate to drop.I will then consolidate and be debt free and will have a larger right off for taxes.My payment could be the same or even less.It depends on the interest rate you have.I will go to a Bi-Weekly and save even more.This will save you alot of money in credit card charges.I just called a charge card company and ask ed if they could give me a better rate.They dropped it from17 percent to 11.9 percent that really helped.I transfered my balances to the lowest rate I could find which was 0 percent for a year and got rid of the high ones.Now I just make one payment , Hope this helps
D.

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M.

answers from Chicago on

I also would like to refer you to a financial advisor. His name is Matthew Joseph and he works with Cherry Creek Mortgage. He has helped us with the purchase of our home and our refinance as well. He can be reached at [email protected]____.com
or by phone at ###-###-####

M. W.

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C.G.

answers from Chicago on

If you are seeking financial security- good luck!! If you are ssking financial "sanity" - I think I can offer some information- If you were to utilize the Equity in your home for Debt Consolidation - not only would it free up all that time spent sorting through bills, figuring out dues dates, making payments- (heck you'd have time for a 2nd job, hobby or even a BUBBLE BATH!)- it will also allow you to utilize the Interest you pay on the Mortgage as an additional Federal Income Tax deduction each year since it is your primary residence. I assume you cannot write off credit card interest- The final benefit - it will likely increase your credit score and enable you to qualify for lower interest rates on future transactions. C.

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M.H.

answers from Chicago on

I would like to meet my husband, Paul Hubbard, over the phone. He has helped a lot of clients in your position and can be reached at:

###-###-#### (daytime)
###-###-#### (anytime)

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