Author Topic: Refinance Debt or HELOC or something else  (Read 2416 times)

bradleylsmith

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Refinance Debt or HELOC or something else
« on: February 08, 2014, 11:41:53 AM »
Thanks upfront for anything you can contribute to the situation!

I'd like to figure out the best way to refinance my debt. I'm thinking about getting a HELOC on the house, we bought it for $81,000 and owe around $76,000 now. The market has gone up since 2011, the avg house in our area is selling for around $70 a sq ft. We have 1450 sq ft, which puts the value at $101,500 or so. The house needs some work, but we're willing to do some minor repairs to get the price up if the HELOC is the way to go. I'm not sure if I should get the loan, or the line of credit. Here's the link for both - https://www.msufcu.org/personal/loans/?expand=helocs,fixed_home_equity#fixed_home_equity

I'm thinking that the APR will be around 7%, though PNC shows the rate for $25k at 5.25%. Either way, I would throw it at the 10.5 and the 9.75% interest rate loans.

Here's the debt:

$6800 @ 10.5%
$23000 @ $9.75%
$13,425 @8.25%
$4,138 @ 7.25%
$11,186 @ 6.55%
$13,777 @ 6.8%
$8000 @ 6.8%
$2939 @ 6.8%
$3033 @ 6.8%
$5,400 @ 5.25%
$1774 @ 4.75%
$5117 @ 4.75%
$7,897 @ 4.75%
$7866 @ 4%

these are all student loans, most are private. I've posted a case study earlier and got tons of great advice on cutting back expenses to hit the debt harder. But we make around $60,000 a year before taxes and we have 2 kids. So we know this is going to be a long process. The other tools MMM ambassadors recommended:

https://www.pave.com/
https://www.sofi.com/

My personal credit score is 698. It was 729 in Dec.  I took a hit trying to sign up for Sam's Club CC Offer to save $40. Bad idea. I'm thinking I should wait for it to come back up to 700+ before applying to anything.

My wife's score is 593. I'm not sure if that comes into play, the house is completely in my name and I'd like the new loan to be just so that we can get lower rates.

So, what do you think? I really just need help getting the process started and help deciding which way to go. HELOC, pave, sofi or something else?


Milspecstache

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Re: Refinance Debt or HELOC or something else
« Reply #1 on: February 08, 2014, 01:43:19 PM »
I have a HELOC on one of my rentals.  They are nice but the interest rate can go up...  that could put you in a bad decision.  If you plan on getting this loan and keeping it to pay off the high interest student loans and then attack your other student loans, then I would suggest a fixed rate 2nd loan on your house instead.

LynnM

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Re: Refinance Debt or HELOC or something else
« Reply #2 on: February 08, 2014, 05:39:24 PM »
Before making any decisions, and especially before giving a lender any fees for credit reports or appraisals, research more as I believe HELOCs may not lend 100% of appraisal.  My experience is more like 80% of appraised value, (so for $100k appraisal, they'd lend up to $80K minus the $76K you owe, so $4000, not really worth it.)  They might not want to explain this to you until after you pay for the credit report and appraisal, or they come back and say, With your credit, we can only lend X amount at a much higher rate.   I would just take the lowest balances and pay them off, then put those payments toward the next higher, etc.  I know paying down higher interest rates is smarter, but I like the boost paying them off provides.  I think there is also legislation coming that allows relief if you make timely payments for 10 years or so, so maybe look into new developments in that area. 

bradleylsmith

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Re: Refinance Debt or HELOC or something else
« Reply #3 on: February 08, 2014, 06:30:43 PM »
thanks guys,

I talked with my wife about it and she's really not comfortable with a HEL or HELOC anyway so I think that option is out. We put in a request for IBR plans on the 6.8% loans which will help us attack the higher interest rates as well. We should've done that awhile ago, but oh well.

So the only other thing is refinancing the 10.5% loan and the 9.75% loan. I really want those two gone, they're killing us. Both are private loans. Should I wait to look into refinancing before my credit score is a bit higher?

Faith2014

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Re: Refinance Debt or HELOC or something else
« Reply #4 on: February 08, 2014, 07:18:49 PM »
If you go IBR on the others, could you put all your extra money into the 6800?  If nothing else, that would bring down the amount that you might end up refi'ing.

bradleylsmith

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Re: Refinance Debt or HELOC or something else
« Reply #5 on: February 08, 2014, 11:22:36 PM »
yeah that's my goal, I'm hoping to throw an extra $700 / month onto that loan now, it'll be gone by the end of the year assuming I don't refi it. The only reason I'm refi'ing is to save money long term.