Mortgage Fearbuster 9

Posted by  on Apr 12, 2010

Q: My husband is going to kill me when he finds out how much credit card debt we're carrying. Is a refinance a good solution for getting debt under control?

A: Depending on how much debt you have, and the finance charge rates (APR--it's shown on your monthly statements), refinancing may be a solution. The cost of refinancing can minimize any benefit of consolidating debt, as it's a new mortgage loan. You'll have to pay closing costs, appraisal fees and lender fees. Get a few refinance mortgage quotes to see if refinancing is feasible. A no-or-low cost home equity loan or line of credit may be less expensive.

Q: My mortgage lender keeps sending me solicitations to refinance or get a home equity loan. They also mention a HELOC. What the heck is a HELOC, and should I get one?

A: A HELOC is a home equity line of credit. If you have enough home equity, a HELOC can supply a source of ready cash. Unlike a home equity loan, a HELOC is a credit line that you use when and if it's needed. You only pay interest on funds used. Expect a variable interest rate, and be judicious in your use of a HELOC; each time you use it you're reducing your home equity.

Q: We opened a home equity line of credit (HELOC) a few years ago, and to tell the truth, it's gotten a little out of control. We used it to finance a car and for a trip to my niece's wedding. Should we refinance to roll the HELOC balance into our mortgage loan?

A: Your situation illustrates how easy it is to run up a balance using a HELOC. With today's mortgage rates between five and six percent, you may save money by rolling your HELOC into a refinance. Get several mortgage quotes, factor in the cost of your refinance, and run the numbers through a mortgage calculator.


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