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We recently fell into some money and are debating what to do with it. We have a low interest credit card (6.9%)and a home equity loan (9.1%). The mortgage and home equity loan together are in excess of the amount the house is worth. This bothers me. We aren't sure if we should pay off the credit card or put it towards paying down the home equity loan or put 1/2 towards credit and 1/2 towards home equity. Can anyone help?
Thanks

Posted: Mon Nov 19, 2007 5:57 am Subject:

If you are upside down in your home,I would put the money there so you have some safety built into your home.

Posted: Mon Nov 19, 2007 10:03 am Subject:

that's exactly what i would do. and the extra money would be paying on the credit cards.

Posted: Mon Nov 19, 2007 12:18 pm Subject:

Just to play the sides here, I've heard that paying the smaller amounts, like the credit card (assuming that is a smaller amount) can be very satisfying and improve your focus on gettind debt free. So if the money is large enough and the cc debt is small enough get it done and out of the way. If it really won't make a huge dent either way, then go for the house....

Posted: Mon Nov 19, 2007 1:15 pm Subject:

I understand that strategy poko but if ur upside down on ur house i'd pay that FIRST and try to get some equity back in ur home!! Also, lots of people will pay off their credit cards and in no time have them charged back up so u end up in the exact same position...
Sad

Ang

Posted: Mon Nov 19, 2007 1:19 pm Subject:

Another excellent point. I've just heard about debt strategy and little victories can be huge to your self esteem. I don't know much about being upsidedown on house payments, I'm a renter, I was just trying to play the other side.

That is the problem with credit cards, is another 'emergency' (sometimes actual sometimes not so much) comes up and you are right back where you were....

Posted: Mon Nov 19, 2007 1:24 pm Subject:

Buy paying the smaller amounts first refers to multiple debts that range from say 300.00 that you would be paying 30.00 per month on and larger ones with a similar payment that is not lowering the principal. By paying off the little ones it allows you to double and triple and quadruple up on the big one. Putting a big dent in it. The mortgage is a different story. This is your biggest investment and should be looked at as an investment rather than a debt.

Posted: Mon Nov 19, 2007 1:26 pm Subject:

It's always a good idea to have equity in ur home.... especially if u need to sell it quickly!
Ang

Posted: Mon Nov 19, 2007 1:35 pm Subject:

In a "normal" market, I would say pay on the equity. In this market, I would say pay the credit card. I am $75k upside down on my house due to the declining property values and its still falling and I am on time on my mortgage payments. Unless I had enough to pay off the whole loan, I would put the $ into my credit cards.

Posted: Mon Nov 19, 2007 1:38 pm Subject:

But this is an equity loan she/he's speaking of.... I think that's diff than ur mortgage... But i also agree with Frogman, this is ur MOST important investment!
Just my opinion though,
Ang

Posted: Mon Nov 19, 2007 1:41 pm Subject:

Then perhaps I read the question wrong....

just my "2-cents" here guys! Just saying what I would do.

Posted: Mon Nov 19, 2007 1:45 pm Subject:

We don't know the particulars here as far how much and how long. If the market is as soft as it is where I live I would try to get out from under that equity loan so you have equity back in your home. I don't know how much your windfall was or what interest rate you are paying and lots of other info and I am by far not an expert it just seems to make sense to me to want to regain equity. Then you could use that extra money that was going to your home equity loan to start paying off that credit card. The result would be no more credit card and equity in your home!

Posted: Mon Nov 19, 2007 1:47 pm Subject:

Knowing where they live would be good info..good point frog. My area is the 5th largest in foreclosures right now in the US and tied for 3rd in declining property value. I have a home equity loan but even paying it off wont put the equity back at the rate its declining. Sad

Posted: Mon Nov 19, 2007 1:50 pm Subject:

Wow Volley that sure sucks!! I'm sorry to hear about that! Sad

And i'm thinking she/he musta posted another thread cuz i remember more details given in the post!!
Ang

Posted: Mon Nov 19, 2007 1:52 pm Subject:

Sucks is an understatement...its is a nightmare.

Did you recall where they lived Ang?

Posted: Mon Nov 19, 2007 1:54 pm Subject:

Actually i don't think they said but i think the home equity loan is what got them upside down... (and the market falling, of course)
Ang

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