Can you roll your CC/unsecured debts into the mortgage when you buy a home?

[MoonJelly]

DH thinks that this is not only possible, but commonplace. I think if it were, everyone would do it and I would have heard about it at this point.

We do have a special case in that we are trying to buy a house from my dad (we are actually living in it and renting it from him now). His plan is to gift it to us, then we would have instant equity. Using that, we would take out a mortgage and that bank would pay him for the house. We'd pay the bank via our payments to the mortgage.

So, I guess I am wondering if having the equity makes any difference in the answer.

[Nu_Mommy_2003]

In your case you will be getting a equity loan not a mortgage because you already will own the property. Can you roll CC and unsecured debt into and equity loan? YES! You will have all the payments rolled into a lower interest equity loan; which gives you one payment a month instead of multiple payments.

Now if you get a mortgage, I have never heard of you being able to roll unsecured debt into a single mortgage. Maybe someone can answer that one.

[RiverSky]

No, not exactly.

You can do that when you refinance or get a home equity loan, if you have equity in your home.

The other way to do it, if to offer say, $200K on a home that will appraise at $200K or more, but ask for $10K back in cash from the sellers, which you can then use to pay off your debts. We used the $8K back to pay for closing costs. The trick is that the mortgage lender need not know that you are doing this but you still have it in writing, and that the seller agrees to your terms. Once I saw a home advertised for sale, saying $25K back towards cost of a pool, and that is how they would have done it.
Make sense?

Otherwise, buy the house and wait three months and try to get a home equity loan to pay off your debts. Or even better, get a 0% credit card that you can move all of your unsecured debt onto and then follow a stringent plan to pay it all off. HTH

[mamato2sweeties]

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[srain]

Think long and hard whether this is something you SHOULD do. If you're not able to pay off your credit cards, you can't get credit. If you can't pay off a mortgage/ home equity loan, you lose your home. Since you have significant credit card balances, that means you haven't been able to live within your means in the past. Is there any chance that could happen again?

[MoonJelly]

Originally Posted by srain

Think long and hard whether this is something you SHOULD do. If you're not able to pay off your credit cards, you can't get credit. If you can't pay off a mortgage/ home equity loan, you lose your home. Since you have significant credit card balances, that means you haven't been able to live within your means in the past. Is there any chance that could happen again?

I hear ya and I pretty much agree. DH has got this idea in his head though and I wanted see if he was way off base or not.

Our balances got high while I was staying home with DD. I am back at work now and for the forseeable future. We do have more stability at this point, but I agree we still need to be cautious.

[ejsmommy04]

We are in the process of adding our credit card debt into a home equity loan. Our payment will split in half and we will actually have a chance at paying it off. It's so hard to get 3 credit cards paid off and it would have taken us years.

[kymholly]

Yours is a pretty unique case, but in general, yes, it is pretty common for people to use the equity in their home to payoff revolving debt. The thing is that most all of these people already own their home. To do it with a first mortgage on a home that was gifted to you could get tricky.

And if you do end up doing it, it's a good idea to write to all of your credit card issuers & tell them to closeout the accounts. (Keep only one open) That way you wont' be quite as tempted to go back into debt again.

Good luck! and congrats on your new home!

[mightymoo]

Sure, you can cash out equity with a first mortage. If you have enough equity - if you have more than 20% equity in the house, you can get an 80% mortage and cash out whatever the difference is. As long as you can qualify for that mortage to begin with of course. If you have less than 20% equity, then you'd need to do an equity line of credit to cash out and equiity lines of credit have higher interest rates and although sometimes oyu can lock the rate, usually its adjustable.

You would be better off paying a mortgage than credit card interest, but hte PP has a good point, don't run that debt up again! However, if you have less than perfect payment history with those cards I wouldn't close the accounts. With every account on your credit report, it keeps a 2-3 year history of the account - if you close the account, the account will stay on for 7 years (or maybe longer) before disappearing. If you close a bad account now, for 7 years it will have the 2 year record of your poor payment history. You are better off locking up the card and once a year buy something with that card and pay it off, then after 2 or 3 years you've check that the account looks clean on your report, then close it. I've had accounts that I kept but didn't use and they didn't update their history - so you may need to use it to end up wiping out the bad history.

[Amys1st]

I am not a fan of equity lines to pay off cc debt. But yes, putting everything on one bill and paying it off sounds much better. But cc debt is unsecure debt and a home is an assett. Also- if the house is gifted to you, you will have to pay income taxes on the gift-Anything over 10K per person is taxable. Is your Dad's home only worth 20K? You would be better doing a closing for $1 to take over the home.

[A&A]

You can, but shouldn't.