Is it wise to go for the debt consolidation?

Re: Is it wise to go for the debt consolidation?

• hoffse member

  

  January 2015

  I have some questions for you first:

  
  

  1) How do you know your house is valued at $350K?  Is that what it appraised for 3 years ago, or are you assuming that is its value today?  How much did you put down on that house and what was the sale price when you bought it?

  
  

  2) Is the $155K the current balance of your mortgage or the starting balance?

  
  

  3) IF the $155K is the starting balance, then remortgaging at $180K won't be quite enough to cover this.  What will you do then?

  
  

  As a general rule, using your house as a form of security to pay off other debts is a pretty risky thing if you have a history of not paying your debts (and you do).  When you don't pay unsecured debts, then your credit tanks and you may - eventually - be sent to collections.  If you don't pay secured debts then your credit tanks and then the bank seizes whatever asset you have secured it with... in this case, your home.

  
  

  Some people use equity in their home to leverage non-home-related purchases successfully.  My parents hav done this years as a way of avoiding selling stocks that are doing well when they need a large amount of cash at once.  For example, they used a home equity line to pay for my college after my 529 ran out. I was in school when things were going gangbusters in the market.  By doing it that way, my parents actually had MORE money when I graduated from college than they had when I started college... and I went to Vanderbilt.  The equity line was also paid off before I graduated, because they were able to pay it off out of their cash-flow by then. So leveraging equity can certainly be done, but I think it's risky if you don't have other assets backing it up. 

  
  

  I don't know.  I know that people use their house for debt consolidation all the time, but I think it's risky to use your home in the way you are describing.  You really don't want your house to actually be backing up non-home-related debt.... you want some buffer that you can fall back on (like investments) in case the payments prove to be too much.

  
  

  I also think you need to answer the questions I posed at the beginning so you know if it's even possible to do what you are describing.  A $155K mortgage for a $350K house when you make $40K/year just doesn't add up to me (unless there's more info you haven't given us?)

  
  

  
  

  

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• CuriousKiddosMama mod

  

  January 2015

  I think Hoffse raises some questions that we really do need to know before we can answer this. Although I"m almost betting that the reason this poster came here is to advertise his mortgage company, but hoping that he does return and want the help I have just deleted the link.
  

  

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• Sisugal member

  

  January 2015

  Do NOT use your house to borrow against other debt or purchases!!
  Start by cutting up your credit cards.  Track ALL your spending to the dollar - then set up a budget where you are living on less than you take in. Then actually live by that budget.
  
  What is the reason for all your debt - and has the issue that caused these debts been taken care of -- or are you living beyond your means?
  

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• Sisugal member

  

  January 2015

  www.nfcc.org
  This is the only credit consolidation/debt repayment organization that is recommended by Suze Orman.  They will work with you to set up a debt pay off plan.
  

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• Wulfgar member

  

  January 2015

  I have a question about house to income, no one that I know of can afford a 350k house making 40k a year.  The rest of the debt is over twice your income.  The best thing to do is to sell the house and pay off all your debt then find something that is within your income.
  

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• Sisugal member

  

  January 2015

  Wulfgar - she has a mortgage for $155,000 which should be affordable for a 40K salary - but not with all that other debt!
  

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• Sisugal member

  

  January 2015

  I take that back - she has a 155K - 10 year mortgage --- that is not affordable on 40K salary.  A 155K mortgage on a 30 year mortgage would work, but would still be ridiculous with all that debt.
  Is the debt from renovating the house to make it worth more?
  

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