Looking to refinance mort. but need advice.

[Jae_cubed]

Hello all I hope some of you will stick it out and read the book I'm about to write as I'm looking for advice on how to best position myself to hopefully refinance our mortgage? I'll do my best to keep it short and to the point.

Here are our stats: we have 3 kids who are costly as well, lessons and sports...

30 year mort. w/ a fixed rate of 6.5% (25 years left) 1950 a mo. includes escrow.

CC debt: Limit: Debt to Credit %, Monthly min. Payment:
700 / 3000 / 23% / 25 (wife's)
1300 / 4950 / 26% / 35 (mine)
9000 / 10,500 / 86% / 200 (mine)
6200 / 19700 / 31% / 180 (mine)
750 / 2000 / 31% / 35 (mine)
9900 / 18800 / 53% / 225 (wife's)

Furniture Loan Balance: 2100. Min. payment 180 (ours)
(No interest for another 2 months but will be hit w/ 1100 in accrued interest if not paid in full) So I will be paying this one off in April.

Truck loan balance: 3100 payment: 280 (mine)
Car loan balance: 8800 payment: 195 (wife's)

Sickening to put this in writing.

2112 income:
me and wife = 79000
my side work = 19500

Basically we struggle every month to pay our bills but have managed to keep up on them all. Last credit check shows (1) 30 day late in the past 5+ years.

Credit scores: wife = 740 +/- and mine is 720 +/-. This was as of 1 year ago so who knows what has changed. We are always told we have good credit but bad debt to income ratio.

I have side work that makes decent money but the problem is that I don't always get paid in a timely manner. So instead of taking this money and making extra payments on bills I save it because I will need it to pay bills for the next few months. So this money dwindles down to nothing and by then I usually get paid again. I feel I have the potential to get out of debt relatively easily if I could just get started.

So in April I should get a check for 11,000. 2,000 of that will be going to Uncle Sam, 2000 will go to the furniture loan and that will leave me w/ 7,000. I also have income of 4900, 4200 and 1500 that I should see in the next 2 months. So hopefully a portion of these can go towards bills as well but I don't want to include these in this for now.

So my main question is how to use this 7,000 to help me have a better chance of refinancing my mort.

My main goal for the refi is to lower my rate and lower my monthly payment. I DO NOT want to rollover any of my revolving debt or car loans. Part of me wants to do a 25 year loan because that is what I have left but if I did another 30 year loan it would make my payments less. Advice?

I was originally going to PAY OFF the truck, furniture loan and the (3) lowest balance credit cards. This would net me roughly 600 a month (lowering truck insurance coverage as well). I feel this would help with the struggling aspect but not sure it's the best idea if I want to refi.

The more I read I might want to hold on to those debts and pay down some of my high debt to credit % cards? I've read that getting them below 50% is a good idea if trying to increase your credit score???

As you can see I'm confused on what I should do. Should I not even think about refi and just work on paying off the debt? I guess I just want to take advantage of the low rates before they start to go up.

If you have made it to this point I greatly appreciate it and I would love to get your thoughts on what to do.

Thanks in advance.

Jae

[lorraineb]

Your problem isn't the home refi, it's that you are spending beyond your means. You simply shouldn't be carrying a balance on any of your credit cards and if you are, you have a spending problem. You are focusing on the wrong problem here. First step is to figure how you can begin tackling your credit card debt and the refinance will likely be a part of the overall program. You will only hurt yourself by focus on one part rather than an entire solution and continue to have money issues in my opinion.

[Jae_cubed]

Your problem isn't the home refi, (Might not be the problem but taking advantage of lower rate by 3 points and lowering my monthly payment seems like a good start to getting my debt in order. it's that you are spending beyond your means.(Can't argue this one I def. have a lot of debt, as I stated I won't get into how I got this debt but it wasn't charging vacations or purchasing my wants... this is my current situation and why I'm trying to turn things around. I'm not sure what you are suggesting I do? I thought I made it clear that I was going to pay off/down 9,000 in debt as well as try to cut my mortgage by $300+/- a month thru refi. I have to start somewhere in order to get my debt paid down and is partly why I'm here. So I'm a bit confused with your message. By your suggestion of me having a spending problem it would seem that I would blow the 9 grand instead of using it to fix my situation.) You simply shouldn't be carrying a balance on any of your credit cards and if you are, you have a spending problem. (Not sure what the stats are on this one but I'm assuming a decent amount of people have some kind of cc debt. There are those who are here w/ debt asking for advise (me) while those who are probably debt free and giving advice (I assume this would be you). And I'd be willing to say more people here have debt than don't. I could be wrong.)You are focusing on the wrong problem here. First step is to figure how you can begin tackling your credit card debt and the refinance will likely be a part of the overall program. You will only hurt yourself by focus on one part rather than an entire solution and continue to have money issues in my opinion.I'm not trying to be rude but where in this thread did you suggest what I should do w/ the $9000? I feel all you did was make an observation about my debt and didn't offer any advice on how to tackle my cc debt.

I know my reply is snippy and probably borderline rude but with as much detail as I gave about my situation your advice doesn't help me in the least. The only thing that is close was your suggestion on my first step to figuring out how to tackle my credit card debt. But where is the advice on this? I'm no better off understanding what to do w/ the 9 grand than I was yesterday.

This should be interesting on how this gets played out as I am the newbie and I know how forums usually treat newbies who are snippy or rude w/ feed back.

Hopefully I'm not overlooking the advice and blowing my top like a hot head

[Petunia 100]

Well, here are some thoughts which occur to me:

Hello all I hope some of you will stick it out and read the book I'm about to write as I'm looking for advice on how to best position myself to hopefully refinance our mortgage? I'll do my best to keep it short and to the point.

Here are our stats: we have 3 kids who are costly as well, lessons and sports...

30 year mort. w/ a fixed rate of 6.5% (25 years left) 1950 a mo. includes escrow.

If you were to refinance into a 15 year loan, your payments would probably be more or less what they are now. That's really something to think about. However, if you simply do not have enough money to stay out of debt and save for retirement, then go for a 30.

CC debt: Limit: Debt to Credit %, Monthly min. Payment:
700 / 3000 / 23% / 25 (wife's)
1300 / 4950 / 26% / 35 (mine)
9000 / 10,500 / 86% / 200 (mine)
6200 / 19700 / 31% / 180 (mine)
750 / 2000 / 31% / 35 (mine)
9900 / 18800 / 53% / 225 (wife's)

At first, I thought those were your interest rates! Then I realized that you were calculating your debt to credit limit ratio for each card. There's no reason to do that. Your ratio is calculated by comparing your total debt to your total credit limit. How about telling us the interest rates on this debt?

Furniture Loan Balance: 2100. Min. payment 180 (ours)
(No interest for another 2 months but will be hit w/ 1100 in accrued interest if not paid in full) So I will be paying this one off in April.

Truck loan balance: 3100 payment: 280 (mine)
Car loan balance: 8800 payment: 195 (wife's)

Sickening to put this in writing.

2112 income:
me and wife = 79000
my side work = 19500

Basically we struggle every month to pay our bills but have managed to keep up on them all. Last credit check shows (1) 30 day late in the past 5+ years.

This suggests that you do not have a written budget, including line items for ALL of your expenses plus savings towards future expenses. If you want to get a handle on your finances and start building wealth and financial security for yourself and your family, you need to start working on a written budget.

Credit scores: wife = 740 +/- and mine is 720 +/-. This was as of 1 year ago so who knows what has changed. We are always told we have good credit but bad debt to income ratio.

I have side work that makes decent money but the problem is that I don't always get paid in a timely manner. So instead of taking this money and making extra payments on bills I save it because I will need it to pay bills for the next few months. So this money dwindles down to nothing and by then I usually get paid again. I feel I have the potential to get out of debt relatively easily if I could just get started.

So in April I should get a check for 11,000. 2,000 of that will be going to Uncle Sam, 2000 will go to the furniture loan and that will leave me w/ 7,000. I also have income of 4900, 4200 and 1500 that I should see in the next 2 months. So hopefully a portion of these can go towards bills as well but I don't want to include these in this for now.

So my main question is how to use this 7,000 to help me have a better chance of refinancing my mort.

Freeing up cash flow is key. That means eliminating the largest payments if possible. The bank also wants to see some available cash in savings. If you paid off the truck loan and the 3 smallest credit card balances, you would eliminate $375 in minimum monthly payments. It would cost $5850, leaving $1150 to deposit into a savings account. That would put you in a much better position.

My main goal for the refi is to lower my rate and lower my monthly payment. I DO NOT want to rollover any of my revolving debt or car loans. Part of me wants to do a 25 year loan because that is what I have left but if I did another 30 year loan it would make my payments less. Advice?

I was originally going to PAY OFF the truck, furniture loan and the (3) lowest balance credit cards. This would net me roughly 600 a month (lowering truck insurance coverage as well). I feel this would help with the struggling aspect but not sure it's the best idea if I want to refi.

The more I read I might want to hold on to those debts and pay down some of my high debt to credit % cards? I've read that getting them below 50% is a good idea if trying to increase your credit score???

The sweet spot is below 30%. This number will affect your credit score, but not the debt-to-income ratio the lender wants to see. Paying off your car loan will not help your credit utilization ratio, but will help your debt-to-income ratio.

As you can see I'm confused on what I should do. Should I not even think about refi and just work on paying off the debt? I guess I just want to take advantage of the low rates before they start to go up.

If you have made it to this point I greatly appreciate it and I would love to get your thoughts on what to do.

Thanks in advance.

Jae

I absolutely would refi my 6.5% mortgage if I possibly could. I think your decision to not roll your consumer debt into your mortgage debt is a very smart and prudent decision. But there is no reason to be paying 6.5% if you could be paying 3.5%. The interest you save will help you pay down your debt faster.

And yes, you do need to work on that debt.

Another thing you might consider is speak to a lender before deciding how to use the 7k. Just as you have done here, give them the details of where you are now and ask what needs to happen in order for you to qualify for a refi.

[Jae_cubed]

Well, here are some thoughts which occur to me:



If you were to refinance into a 15 year loan, your payments would probably be more or less what they are now. That's really something to think about. However, if you simply do not have enough money to stay out of debt and save for retirement, then go for a 30. As much as I would like to pay the house off sooner I feel the need for a lesser payment is req'd at this time. If I was in a better place w/ little or no debt a 15 year loan would be the smarter choice.



At first, I thought those were your interest rates! Then I realized that you were calculating your debt to credit limit ratio for each card. There's no reason to do that. Your ratio is calculated by comparing your total debt to your total credit limit. How about telling us the interest rates on this debt? I wasn't sure if this was the case or not. Thank you for clearing this up for me.
Rates are:
700 0% for another year
1300 19%
9000 12%
6200 17%
750 16%
9900 13%
Looking at it this way what should I do? I assume work off the higher rates first? But I'm wondering... my highest rate doesn't have that big of a balance but my second highest rate has a greater amount. I'm thinking the interest $ amount is greater on the 17% than it is on the 19%. So should I work on the 17% first? Thoughts?



This suggests that you do not have a written budget, including line items for ALL of your expenses plus savings towards future expenses. If you want to get a handle on your finances and start building wealth and financial security for yourself and your family, you need to start working on a written budget. I have tried to do this in the past but I'll admit I'm not very good at it. I will research this and see if I can't find some examples to follow or at least get some ideas.



Freeing up cash flow is key. That means eliminating the largest payments if possible. The bank also wants to see some available cash in savings. If you paid off the truck loan and the 3 smallest credit card balances, you would eliminate $375 in minimum monthly payments. It would cost $5850, leaving $1150 to deposit into a savings account. That would put you in a much better position. After seeing my rates do you still believe this to be the best option?



The sweet spot is below 30%. This number will affect your credit score, but not the debt-to-income ratio the lender wants to see. Paying off your car loan will not help your credit utilization ratio, but will help your debt-to-income ratio. Good to know.





I absolutely would refi my 6.5% mortgage if I possibly could. I think your decision to not roll your consumer debt into your mortgage debt is a very smart and prudent decision. But there is no reason to be paying 6.5% if you could be paying 3.5%. The interest you save will help you pay down your debt faster.

And yes, you do need to work on that debt.

Another thing you might consider is speak to a lender before deciding how to use the 7k. Just as you have done here, give them the details of where you are now and ask what needs to happen in order for you to qualify for a refi.

I actually did talk to a lender today to see what they advised They suggested not paying off the truck if it has less than 9 months left. I was told that amount will not count against me as the remaining payments are mostly principle. What I was told anyways.

Thank you for taking the time to give your thoughts. This gives me a few things to think about and research.