Cash- out refi to pay credit card bills is risky

Sun Sentinel Broward Edition - Homespot - Broward East - - LIVING G SPACES - By Ilyce Glink and Sa­muel J. Tamkin,

Tri­bune Con­tent Agency Q: We would

like to get a lower in­ter­est rate on our mort­gage, and we are hop­ing to get money out when we re­fi­nance. We’re go­ing to use the cash to pay off our credit card debt, which is why we would like to get money on the re­fi­nance. a cash-out re­fi­nance and even then, there are costs that can make this pro­hib­i­tive.

But we can un­der­stand why you’d want to do it. If you’re pay­ing dou­ble-digit in­ter­est rates on credit card debt, it makes fi­nan­cial sense to trade those sky-high in­ter­est rates for a locked-in fixed in­ter­est rate at what are still near-his­toric low rates.

But you have to un­der­stand that by tak­ing out a home eq­uity loan, you’re putting your home at risk. If you don’t pay your credit card debts, you could wind up hav­ing a col­lec­tion agency chase you all the way to bank­ruptcy. If you don’t make your mort­gage and home eq­uity line of credit pay­ments, you could find your­self in fore­clo­sure, tossed out of your prop­erty.

The first thing to find out is how much eq­uity you have in your cur­rent home. Then, you have to find out how much your prop­erty is worth. Then, you have to check your credit his­tory and credit score, to un­der­stand what kind of an in­ter­est rate you’ll be fac­ing on the cash-out re­fi­nance.

Fi­nally, you have to talk to some lenders un­til you find some­one who is will­ing to do the trans­ac­tion for costs that are rea­son­able so that the whole trans­ac­tion makes sense.

We’d love for you to think about why you’ve run up all this credit card debt so that once you do your cash-out re­fi­nance, and get your fi­nances squared away, you don’t find your­self spend­ing more than you can com­fort­ably pay off at the end of the month.

For more in­for­ma­tion, con­tact Kathryn We­ber through her Web site, www.redlo­tuslet­

(c) 2014 Kathryn We­ber. Dis­trib­uted by Tri­bune Con­tent Agency, LLC.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.