| Question |
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Should I take out a 2nd mortgage or home equity loan to pay off credit cards?
I'm going to be putting my house on the market soon. Should I pay off the cards now or wait til I sell the house? I expect to make enough to pay off mortgage AND outstanding cards but would like to pay cards sooner.
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| By
mrfixit6549 |
Posted on
09/26/09 Total Answers
7 |
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| Answers- |
| Wait until you have the cash in the bank.
This way you have enough leeway to adjust your sales price to find a buyer for the house and don't have a set amount, you absolutely have to ask for, looming over you.
Sell house, pay off mortgage and then use what is left over to pay off the cards. (which hopefully leaves you with enough for a down payment on the next house?) |
| Answer by :
Reena On Date
2009-09-26 10:36:41 |
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| With the downturn in housing value, this is a chancy move. You would be better off sticking to a strict budget, and gradually paying off the credit cards. Do not charge anything you can't pay off totally when the bill comes.
Say you sell your house without a cushion between the amount owed, plus selling expenses such as transfer fees and commission, and the amount you receive for the house. You won't have any money left for a down payment on the next house, so you will probably have to rent for a while. |
| Answer by :
Mary P On Date
2009-09-26 10:38:19 |
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| Even though the credit cards are carrying a higher interest rate, I would recommend staying away from adding more debt to the house right now. You are limiting how low you can go on the house price to get it sold, and in today's market what you expect to get and the offers that do come in can be quite far apart.
If you got a best offer that was lower than the two mortgages, you'd have to pony up the cash right now to be able to transfer title to the new owner. Without the second mortgage, if you ended up getting less than you expected but enough to pay off the first lien, you could still pay the cards as you have been.
If you do decide to go the second mortgage route, don't list your house for sale until you get that one closed. If the lender sees it listed, or listed within about the last year (they do check), they won't want to make the loan. This is because they will know that there's a chance it will be paid in full shortly and they would not have a period of time collecting interest to offset the costs of making the loan that are not passed on to you. |
| Answer by :
OldJimmy On Date
2009-09-26 10:49:51 |
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| Look at the figures. Figure out how much the loan will cost you to pay off your cards (fees and interest as well as an early payment fee, if there is one) as compared to waiting to pay off your cards. |
| Answer by :
h2oelemental On Date
2009-09-26 10:50:59 |
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| I'd wait until the house sells. After all, you could be there a while before it sells. Your house is a secured loan, the credit cards, unsecured. I wouldn't risk it, especially with the state of the real estate market. |
| Answer by :
melinuxfool On Date
2009-09-28 06:12:01 |
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| It sounds like a shell game that you would be playing. Ideally, you will wait until you sell the house. At that point, you are dealing with "real money" and not speculated profits that may never arise. Something else to consider is that most home equities loans will be offered at zero cost, but the fine print states that you will have to pay a penalty if you pay off within the first 3 yrs. This penalty is usually the amount it cost to close the loan, which will be between $800-$1,000 in most states.
Josh Burley
www.joshburley.net |
| Answer by :
joshburley1 On Date
2009-09-28 10:45:06 |
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| Hello Mrfixit6;
I would not suggest that you take a second mortgage since it will have closing costs anyway.
Wait until you sell the house and then pay them off. You made it this far, you can wait till the closing to pay them off.
Wish you the best! |
| Answer by :
BuyingHelp On Date
2009-09-28 18:21:18 |
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