restructuring debt

[its_our_family]

Good idea??

Let me explain.

We owe 72k on our house. We have a 30 year fixed rate mortgage. We are in year 28. Our house is worth 115k.

We have a little debt. Well, it adds up to to omuch for our liking but not a lot in the grand scheme of things. We owe double what our family car is worth and the payment is killing us, we can't even refinance it.

If we take out a 20 year loan to cover the cost of our house, car, and a few smaller things our payment will drop $250 dollars and we will pay off our house faster. Nw, I don't like wrapping up other debt in the house but by the time we are planning to sell we would have just paid off the car and only paid another 8k toward the house.

If we take the new loan we will go from have 97000 in debt to 50k in debt. If we do NOT take the new loan we will go from 97000 in debt to 68k in debt. the interest rate and the rate we pay it helps take it all down.

So, then when we sell the house we will only owe 50k and should be able to get 120k at least out of it.

What do you think? What questions should we be asking ourselves that we might be forgetting?

[That Is Nice]

Originally Posted by its_our_family

If we take out a 20 year loan to cover the cost of our house, car, and a few smaller things our payment will drop $250 dollars and we will pay off our house faster. Nw, I don't like wrapping up other debt in the house but by the time we are planning to sell we would have just paid off the car and only paid another 8k toward the house.

Hmmm...well, it sounds to me like it would be a good idea to pay off the debt by using the equity in your house.

Here's why:

1) lower rates
2) lower monthly payment overall

I didn't understand all your numbers though, but I'll post that in a second post.

To me, it would seem to make sense. Can you speak with a financial consultant for free somewhere, though?

Good luck!

[That Is Nice]

Originally Posted by its_our_family

If we take the new loan we will go from have 97000 in debt to 50k in debt. If we do NOT take the new loan we will go from 97000 in debt to 68k in debt. the interest rate and the rate we pay it helps take it all down.

I didn't understand this part of it. That's the only thing confusing me. Other than that, I think refinancing to pay off debt seems like a good idea.

[That Is Nice]

Originally Posted by its_our_family

Good idea??

Let me explain.

We owe 72k on our house. We have a 30 year fixed rate mortgage. We are in year 28. Our house is worth 115k...

...If we take out a 20 year loan to cover the cost of our house, car, and a few smaller things our payment will drop $250 dollars and we will pay off our house faster.

This didn't make sense to me either...unless you have a really high rate on your 30 year mortgage currently and you'll be going to a much lower rate with a 20 year mortgage. Still, the amortization from 30 to 20 years would raise most people's mortgages quite a bit.

??

[its_our_family]

It was just showing that we would pay off almost 20k MORE debt total by restructuring.

It would be even better in a 10 year loan but we woulnd't save any money monthly. HOwever, when we went to sell we would only owe 30k on the house. this way we can pay it off quicker AND save money monthly.

The other thing we mde sure of was that Benjamin's paycheck covered the new payment in less than one check. So, with a 20 year loan we can pay the payment in one payday and not have to space it out over 2.

[velochic]

I really have no idea what you are talking about. (Sorry!) It seems you are saying you are going to take out a consolidation loan, but owe less? Please clarify, because it most definitely doesn't work that way.

[its_our_family]

Ok, it would raise th monthly payment on the house but it would consolidate other debt so that we are paying a lower cumulative interst rate.

Let's just say that we owe 70 on the house and 20 on the car and our car payment is 75 dollars LESS than our house. That interest rate is so high that it would be cheaper to combine the debt for a lower rate.

[UUMom]

If you refi your house, would you go back into a 30 yr mortgage? If I am understanding, you would be making your 5 yr (?) car loan into a 30 yr car loan? You only have two years left to pay your mortgage, so I am confused.

ETA- OK. You are saying yu have 28 yrs left on your mortgage, not 2. If you don't use your home as an ATM, I think doing this once can help.

[its_our_family]

Originally Posted by UUMom

ETA- OK. You are saying yu have 28 yrs left on your mortgage, not 2. If you don't use your home as an ATM, I think doing this once can help.

No ATM here

The issue is that we still owe 5 years on the car and 28 on the house. If we refi to a 20 year mortgage we will actually pay the debt faster. Ahen we go to sell we will have paid off the amount of the car plus more, when we would have jsut barely paid off the car.

We owe 22k on a 10k car. DOn't ask. Ok, you can but I'll save you time. We bought a car 6 years ago we coulnd't afford. The interest rate was so high that in 2.5 years we had paid off a total of $800 on it. 2 years ago the car started to die. So, we had to trade it in, since we coulnd't afford to fix it, and got a car with a warranty. We had roll over. Sucky Sucky rollover. Now we owe 22k on a 10k car (lots of miles and a newer car).

Talk about being stupid.....

[Azuralea]

I am not sure I caught all the numbers, but I think what you're getting at is that you'd like to refi the house and use house equity to pay down a high interest car debt.

I'm generally not in favor of using house equity to pay for consumer goods, but I think in limited circumstances it can work. Specifically, if you don't do it for any other reasons (e.g., no refi's again for consumer items), you plan to stay in your house for a long time, you can cover the higher house payment for a good amount of time in case of job loss or other emergency, and it would clearly result in a financial benefit (e.g., the loss of a high-interest loan.)

The biggest catch in my mind is making absolutely sure you can afford higher house payments even in case of an emergency. If something terrible happens and you can't pay all your bills, at this point you'd go into default on the car loan but you'd still have your house, presumably. Not great but at least the house is safe. If you roll the car debt into the house debt, you take the risk that if something goes wrong you'd lose the house.

It sounds like you have that covered, though, because you're still able to save even with the higher house payment.

I guess the last thing I'd say is be careful refi-ing now because there are so many sleazy vendors out there!

[its_our_family]

Originally Posted by Azuralea

use.
It sounds like you have that covered, though, because you're still able to save even with the higher house payment.

I guess the last thing I'd say is be careful refi-ing now because there are so many sleazy vendors out there!

Yes, the combination of the payment would be less than the payment seperate is. Because it would be a collectively smaller interest rate.

We are talking to the company that is my parents mortgage company for the last 12 years.

[That Is Nice]

Originally Posted by Azuralea

I am not sure I caught all the numbers, but I think what you're getting at is that you'd like to refi the house and use house equity to pay down a high interest car debt.

I'm generally not in favor of using house equity to pay for consumer goods, but I think in limited circumstances it can work. Specifically, if you don't do it for any other reasons (e.g., no refi's again for consumer items), you plan to stay in your house for a long time, you can cover the higher house payment for a good amount of time in case of job loss or other emergency, and it would clearly result in a financial benefit (e.g., the loss of a high-interest loan.)

The biggest catch in my mind is making absolutely sure you can afford higher house payments even in case of an emergency. If something terrible happens and you can't pay all your bills, at this point you'd go into default on the car loan but you'd still have your house, presumably. Not great but at least the house is safe. If you roll the car debt into the house debt, you take the risk that if something goes wrong you'd lose the house.

It sounds like you have that covered, though, because you're still able to save even with the higher house payment.

I guess the last thing I'd say is be careful refi-ing now because there are so many sleazy vendors out there!

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