Refinance to consolidate debt?

[34saving]

Refinancing won't put your house at any more risk than it is now. (Either way you don't make your mortgage payments and they can take your house . . .your mortgage payment aren't going up significantly, so . . .) I totally agree you want to look at everything before you do a refi. I also think you most likely have. A refi even for the change in interest rate would not be unreasonable for you. (Just make sure you get a good deal like Terry keeps saying.) Refinancing would not be a failure for you, it would simply be restructing debt in a way that makes it so you can live your life again. As I said before, I'm pretty conservative when it comes to this kind of thing, I also think that after you do a quick once over to make sure you haven't missed anything go ahead and do it.

[Tree0164]

That adds up to $2908 for me. So for almost $600 dollars for food and various other costs. How much is your grocery budget. If just the two of you, you can really eat cheap. I spend about $350 on a family of 5.

The thing that stands out to me is the car payment. That is extremely high. Maybe sell the car and get something used.

Why do you have isp if you have DSL?

Life insurance shop around $75 a month is alot. If that is whole life, get term life.

You could probably afford atleast another $100-$200 in a debt repayment if you make some small changes.

[terry1156]

Originally Posted by 34saving

Refinancing won't put your house at any more risk than it is now. (Either way you don't make your mortgage payments and they can take your house . . .your mortgage payment aren't going up significantly, so . . .) I totally agree you want to look at everything before you do a refi. I also think you most likely have. A refi even for the change in interest rate would not be unreasonable for you. (Just make sure you get a good deal like Terry keeps saying.) Refinancing would not be a failure for you, it would simply be restructing debt in a way that makes it so you can live your life again. As I said before, I'm pretty conservative when it comes to this kind of thing, I also think that after you do a quick once over to make sure you haven't missed anything go ahead and do it.

I understand what you're saying, but I don't totally agree. Trading unsecured debt for secured debt is always a risk, even if the payments go down.

[Snoopy2645]

I agree about the car payment that does seem high to me too I would also try to sale the car & get something cheaper then you could also lower your car insurance. And I would also check around for the life insurance also. I really dont believe in car payments is thier a way you could sale the car & get something thats paid for?

I know I am pretty much always againist refinancing but sometimes it does seem like the way too go. What I did when dh wanted to refinance is I took all CC's & transfered to 0% rates to get them paid off quickly. That 22% interest adds up fast even on just a small amount of debt.

[terry1156]

Originally Posted by Snoopy2645

What I did when dh wanted to refinance is I took all CC's & transfered to 0% rates to get them paid off quickly. That 22% interest adds up fast even on just a small amount of debt.

An excellent point that I should have asked about sooner. What are the current rates you're paying on the credit card debt? Since you have excellent credit, it should be possible to switch the debt to lower or 0% credit cards. If that is possible it might start putting a dent into the debt, especially if your credit card interest rates happen to be high.

[34saving]

36 Rock has answers on credit card rates and amounts earlier in the thread . . .don't remember exactly where, but I know they're there

[terry1156]

I seemed to have completely missed that. Thank you for pointing that out 34saving. I found the post and this is what it said:

"I have 7.9% on 4 thousand, 0% on the 11 thousand till it's paid (yes, our credit is that good). "

My first question is why would you ever want to roll the $11,000 that is interest free into your home loan?!?

Pay the minimum on the $11,000 each month for now. Concentrate on the $4,000 at 7.9% - see if you can get that on a 0% card too. If not, you might want to consider a HELOC for the $4,000 only. Since you seemed determined to pay off the debt, it's unlikely that interest rates will rise enough to make it a higher loan than the 7.9% you're currently paying.

If you do decide to refinance for the lower monthly payment, I would only put in $4,000 to get rid of that credit card debt. Since the $11,000 is interest free, there is no reason to start paying a higher interest rate plus trade unsecured debt for secured debt.

What is your minimum monthly payment on the $11,000 and on the $4,000?

[cicy33]

I personally think that the one big glaring thing that I am hearing is that you are extremely burned out. Paying off debt is a big deal, believe me I am working on it but I don't think that people should have to be miserable to do it in 2 or 3 months quicker. I have cable and the net and I don't "need" them but I am also not giving them up. It is one of the few things I have for entertainment. If the credit card that you have your son's loan on is interest free I would almost leave it on there. However, if the difference in making the payment and not wanting to jump off a bridge per se versus putting it on your mortgage I would add it to the mortgage. Yes it is best to have no debt but it is not good to be so miserable because of it. There is more here than just the money. Here is one good way to look at it. If you continue the way you are going how long will it take you to be done with your sons loan and the mortgage? If you change it to your mortgage how long will it take to have the mortgage completely paid? Cuz if I understand properly, you are planning on paying off the mortgage early either way. Also remember if you are paid weekly, that several times a year we are paid 5 times a month. try to take that extra payment and completely apply it to the loan. For ex you say that you are paid 3100 monthly, divide by 4 and you have $775 per week. So if you were able to ignore the extra payment that you receive a few times a year for the next 4 years (that is the time you were planning on working extra) you would have an extra 4 payments a year which is the 3100. This only works if you are paid weekly and you are not counting on that extra payment. I am trying to work towards that myself. This is also not counting on your extra job. If you must have the extra payment then of course this wouldn't work.

[36Rock]

Thanks to everyone for your welcomed advice. Let me quickly answer a few questions before I comment on the status of "Refinance or not".

1) The car payment is high, I had just purchased a new car right before my son's car was totaled and we had to take over the debt. I have checked into selling and getting a cheaper car. We would loose a lot of money doing so (the down payment) because it's fairly new the blue book value would not give me enough to buy another car. Then I would be upside down on that car note. No money to pay cash for one either. We do own a truck that is paid for, we always have one vehicle paid, never two payments. We did have 3 cars, the 3rd was sold and paid on this debt. You have to understand the debt was $25,000 to start with, we have paid 10K so far.

2) we have whole life insurance, part of the $75 does goes into a savings part. We are checking into whether or not we can get the savings money out. Also we have had this policy for over 20 years would not want to change. Don't think at our ages that would be a smart move at all.

3 Extra cost I didn't mention before is $75 for my mothers yard maintence. She is 80, she cann't afford to pay it herself. I am also her main care giver. We where there this weekend and had to remodel her bath. I realized that I do more in financial support than just the yard care. I'm purchasing several meals, dog food etc., extra gas for trips to her house (25 mile one way) every other day. She lost her cain at wal-mart, I had to replace it.

4) I can roll the 4K onto a 4.99 card and plan to do so if we don't refinance. Also will focus on the 4K first because it has interest attached. Also stop paying extra on my currect mortage and pay that extra $50 to the debt if you decide not to refinance.

5) We are both montly paid. Even my extra jobs are montly paid.

6) I have DSL and a ISP because of my main full time job. My local small ISP handles my email, the DSL is just for the fast connection part. They give me one filtered and one not filtered so that no file I get is blocked. All my work comes and goes through email, on certain days if my email goes down my company loses a quarter milllion. A big ISP doesn't care, my local small ISP does. If DSL is down, I can use their dial up if I have to.

So far the refinance is on hold while we take a good hard look at all our options this week. I really don't want to refinance or roll a 0 interest debt into my home. But I also want my life back to normal. Thank you CICY33 for noticing, I am burned out. This debt is not something my husband and I did, our lifestlyes did not create this problem. What we did was the right thing, we didn't give the wrecked car back to the finance company and say "sorry we are not paying for it" We stepped up and and took responsibly and we are making our son do the same as much as he can afford.

I've been asked to do another job (which gives me 5 jobs with my part-time business!) which is good for the money, not sure what they want to pay yet, but is it good for me?. I'm stressed out now, how will I fit more into my life? When do we stop? What happens if my mother needs more help? I'd like to spend more time with my grandkids. Do I work all these jobs for next 3 or 4 years and my littlest grand child is then 4 or 5 and I've missed it? Should I have to give up my nice car when I earn it and pay for it? Where is the line in the sand drawn?

Ahg....... yes it's driving me crazy.

[34saving]

I know people who refi. every few years so they can go to places like Disneyland. That, IMHO, is really stupid. What you're suggesting is far from stupid. As I mentioned before, the interest savings alone would be a legit reason to refi. The fact that you also get your life back and maybe get some flexibility is a definite bonus. I'll say again, I really am conservative when it comes to this stuff (first house paid off in full at age 28), but I think you have no reason to feel bad about the refi. Do the research, be careful, don't be stupid . . .but don't feel like you can't do it. (BTW, what's the interest on the car loan? Could you pay that early with refi. money and leave the zero percent credit card where it is?)

[terry1156]

I think stepping back and taking a little time to go over the information again is a good decision at the moment. There have been a lot of good opinions and I'm sure you will choose what is right for you.

In all this we haven't talked much about your sons responsibility. While you are taking on all the tress of paying it back, in reality he is the one who should be responsible. Knowing that family dynamics don't always allow for all things to be done, I think he should be involved in how everything is to be paid off with him ultimately paying it all since it was his mess that got you here. While probably not comfortable and it'll cause some friction, if he doesn't he won't learn a thing and do it again at some later time. Why isn't he working 4 jobs to help pay it off? At the very least he should share in the stress and not leave it all on you (my small rant is over).

Please keep us informed what you decide and throw out more questions if you have them.

Keep us up to date

[36Rock]

I welcome your rant terry1156, my son is helping with at least $100.00 per month toward the debt. He fully understands he owes the debt back to us. No matter how we pay it, his debt remains with us until paid in full. I handle his finances and know where every penny goes, so I know he is paying as much as he can. He works a weird full time schelude, 3 days on 2 days off, 2 days on 3 days off. Rolls around two weeks days and two weeks night. Makes a part-time extra job hard, but he works painting odd jobs as much as he can for a friend. So he is doing his part, I keep him on a tight budget. He drives a car worth about $800, with no air (in Texas). He understands that he will be paying us for a long long long time.

It took us a while to get over being mad at him, he is young and took a risk when his money was tight and didn't pay his insurance on his new car. It back fired big time.


As it stands today, no refinance. My husband's vote is for refinance (he is worried about me and all this work). I'm the money gal so my vote is toward not doing it. Oh, just in case everyone is wondering. Because I work at home, I have a totally flexible job/hours this allows me to have extra jobs more than anyone else.


Thanks to all for your comments, I'll keep you posted!

36Rock

[36Rock]

34saving...... How did you pay off your first house at 28? I'm very interested in your method. What was the home worth? Did you have regular note (30 years)? I did have my first house at 18 but it wasn't paid for.

[34saving]

Wow. That's kind of a long story I guess. We bought our house when we were engaged for $129,900 (1997-- houses were cheaper then!) We had some money because my husband was the son of a faculty member and I got a full scholarship (so we still had the money we'd be saving our whole lives after college). The wedding wasn't for another year, so I lived with my parents and Eric lived with 3 roommates (4 bedroom house). The roommates paid $750 a month (total) and I helped (a little) too, but I was student teaching, so I only helped out of savings. After we got married we had a young couple live in our basement. They paid $350 a month. When I got a teaching job we wanted to continue to "live on one income", so we took the vast majority of my income and applied it to extra mortgage payments ($1400 a month extra + $1250 on a 15 year fixed at 7.25% = $2650 a month) Next thing you know, no more mortgage That's the method I guess

[jmjj215]

36Rock, this quote bothered me a bit:

the blue book value would not give me enough to buy another car.

when combined with this one:

Should I have to give up my nice car when I earn it and pay for it?

You said you only have one car note, and you pay $500 for it - with great credit?! That is one really nice car it sounds like. Did you roll some negative equity into it that caused you to be upside down? What was the purchase price for the car? How much is the kelly blue book value now? If you took out a loan for the difference you're upside down + $3k for a car that runs great but is a bit older, you'd probably free up another $300-$400 per month and it seems that your troubles would be over...am I missing something here? Sacrifice the nice car in the short-term so you can get out from underneath this. I still would NOT refi.

[jmjj215]

Forgot to add: I think you don't want a car that would go for what the kbb value is - you could definitely find one...

[cicy33]

Originally Posted by jmjj215

36Rock, this quote bothered me a bit: when combined with this one: You said you only have one car note, and you pay $500 for it - with great credit?! That is one really nice car it sounds like. Did you roll some negative equity into it that caused you to be upside down? What was the purchase price for the car? How much is the kelly blue book value now? If you took out a loan for the difference you're upside down + $3k for a car that runs great but is a bit older, you'd probably free up another $300-$400 per month and it seems that your troubles would be over...am I missing something here? Sacrifice the nice car in the short-term so you can get out from underneath this. I still would NOT refi.

Think that I can assist here. When you buy a car new, and drive it off the lot you LOSE money. I don't care if it has one mile on it when you drive it off, you lose with depreciation. That said, the actual value of the car is probably what she owes, but to sell or trade it in she would be less the value, cuz as we all know, trade ins are given less than actual value. So she would be upside down if they traded it in for a cheaper car. To answer the other question, I would not give up my nice car and go futher in debt by being upside down. better to go ahead and pay it off. I actually don't think that $532 is super high for a car payment. That is actually becoming more common these days with cars costing $25,000 and up for a normal vehicle. Personally couldn't do it but I do have a lot of friends that pay that much. And they only have one that is not paid for. So I tend to agree, why should you have to give up your car if you don't have to. I still tend to vote for the refinance and apply as much as possible. These extra jobs you have, do you have to drive to them? Take a lunch, eat out? I would also be looking at what extra expenses you are incurring by working extra jobs. For ex, if the job pays $500 but you are spending $200 in fuel, and $100 in gas you are only actually profiting $200 a month. not saying is the case just a scenario. and this does not include extra laundry if you have to wear special clothes. Staying at home to work (I am so jealous) is much cheaper!

[jmjj215]

To answer the other question, I would not give up my nice car and go futher in debt by being upside down.

cicy, you are not going further in debt, you're getting out of debt.

Let's say you finance a car w/ a $500 car payment. You drive it off. The value drops like a rock. Now you're in this situation we've discussed in the thread: a cash flow problem ultimately. So, the car, for which you paid $30,000 is now worth $20,000, but you owe $25,000 on it. You are in debt 25k. So you sell the car private-party to get 20k for it (trade ins are a rip-off 95% of the time). You take out a loan for 8k, 5k to finance the negative equity in the car, and 3k to finance a new vehicle (if you don't have the cash on hand, which they don't).

Instead of being 25k in debt, you're now 8k in debt, w/ a payment of probably $150 instead of $500. Cash flow problem solved - at least a huge chunk of it.

[jmjj215]

That is actually becoming more common these days with cars costing $25,000 and up for a normal vehicle.

One of the reasons prices are going up so much is because people are willing to stretch the payoff from what used to be 3 years, to 5, to 7, etc. If people were paying cash for cars instead of financing up to their noses, the prices would come down b/c people would be negotiating on the price instead of the payment.

[cicy33]

I agree on both posts above. I personally can't stomach buying a car for that much but that is just me. my house only cost $45,000 for a 3 bedroom. So paying for something that in this area I could purchase a smaller house for is scary. but I know that in other areas people spend much more. (I want a nice SUV but don't want to pay $25 K for it so I will wait and get a used one someday. lol) Course in regard to vehicle loss, you first must find someone that is willing to pay that much for a used car. Now, for me, if I am going to pay that much, I am going to go ahead and finance one a little more expensive because I get a warranty with it. I guess for me anything above $20K for a car and it no longer equates for me. But I am sure that there are people that will pay $20K for a used car but I know I wouldn't! So that is assuming someone will pay the $20K. Have I missed it but what is the interest payment on the OP's vehicle? Maybe that would be something to consider when refinancing! Remember, the loan on the son's car is 0% interest!