My Refinance Story

Hi Abe...I'm a loan officer. Thanks for sharing your story. All though using your equity to pay off debt can sometimes be a good thing, sometimes folks should really take a hard look at this. The economy has now changed and value is dropping on most homes. Many folks that used their equity to paydown debt are now really struggling. They now owe more than what the home is worth. Some have since lost jobs and are unable to sell their homes.

I agree that sometimes this is a good option. But now always for everyone.

Thanks for sharing your story.

Consolidating unsecured debt into secured debt is a big mistake. A lot of people got into trouble doing this, ending up with higher mortgage payments they could not afford and well as an upside down mortgage with the declining home values.

I agree Soaplady. Overall it will save you money, but in the end, if you default on a credit card they cant take your home. Your mortgage payment most of the time goes up. But again, over all, lets say your total monthly payments on unsecured debt is 1500 per month. Your mortgage payment is 500 per month. You use your equity to pay off the debt and your mortgage payment goes to 800 per month. Overall that's a 700 per month savings. At first that looks like a great idea. But in the end, your now paying 300 more on your mortgage, extended your rate back to a 30 year loan. It's not a good idea. And again, I am a Loan Officer. There are very few circumstances that this would be a good option for some.

i would not use your equity to pay off unsecured debt. plus most banks are capped at lending at 80% on a conventional loan and 85% on a FHA loan. everybody is really cracking down on pulling cash out of your equity

How about if you are refinancing to lower your interest rate. I am making my payments on time with everything; it's just I lost about $1000 mo in child support unexpectedly and barely have money after wards. I wanted to refinance from 6.5 to a lower rate. I do not have settlement money again (I've been in my house 1 1/2 years). I am currently with wachovia and have been banking with citizensbank for about 5-10 years. I see all the ads but do not know who to trust (I'm scared). I see quicken, lending tree, etc horror stories.

I would start with your existing mortgage first. Also, credit unions are pretty good too. Most of them do not require that you be a member in order to get a loan from them. I know the one I work for doesn't require it.

You need to really take a hard look at this and see if it's worth it. Will you have any equity left? Is your mortgage payment going to go up? If you can pay off the debt and lower your mortgage payment, not your overall payments, then I would say it would be okay. But remember, you will more than likely go back to a 30 year loan. In the long run it hurts you. But if you are unable to make ends meet then I would say it's worth looking into it.