Considering Home Equity Line of Credit or a ReFi...

[boristhinky]

am 34 years old, divorced and getting married in a few months. I have sole custody of my 2 kids.

Divorce 5 years ago was terrible financially. The lawyers were expensive. Then there was the alimony, the child support (which i paid even though I have them 100% of the time) and the bills the ex-wife had run up all over the place just to mess things up for me. Taking care of that got me behind in taxes by about $100k, which I've just now caught up on just as the alimony is set to expire. So I'm about to be living free again

Salary: $200k
Other income: $100k
Life insurance: $4m policy
Home: $550k value / $350k on the mortgage ($200k equity)
Debt: Other than the mortgage, just 2 $25k car loans that cost about $500/mo ea.

Other Assets: I own significant holdings in 2 privately held companies. While my stakes are valuable, the positions are not currently liquid.

Company 1 is a successful manufacturing business I own about 1% of. They pay me about $100k in annual distributions, which is what I've listed as "other income" above. These payments come quarterly. The are in constant negotiations to sell, and my stake would be worth $1m - $1.5 million probably, based on the negotiations I'm familiar with. I expect this position to cash out within 1-3 years. I have no control over when it does.

Company 2 is my primary business and where I derive my base salary from. Based on the last round of investment we took, my position is worth about $4 million. Again, this is all on paper and it is not currently liquid.

I believe myself to be asset rich/cash poor. I have a 15/yr mortgage that costs me about $3400/mo. Adding in the cars and other expenses I can only put away a couple of thousand a month, which I haven't done much of to date due to the ex-wife/taxes situation described above.

I would like to have more cash on hand for emergencies. I'm also getting married in a couple months and am really stressing out over getting everything paid for. Current plan is just to use credit cards for what I can't cover with cash.

I'm considering either refinancing or establishing a home equity line of credit to access some of the $200k equity I have in the house. If I moved to a 30 year, I could get about $50k out while reducing payments by $1,000 per month. However, I'll pay closing fees and more in interest over the long term. I like the idea of owning the home as quick as possible. If/when I get liquid from my holdings, I'd seriously consider paying off the entire house. The other option would be the line of credit that I could access as needed. Another complicating issue is my crappy credit rating (another by-product of the ex-wife) which sucks and is about 680.

I'm really beginning to weigh the options and any thoughts/input the community can provide would be appreciated.

[LivingAlmostLarge]

I hope you are getting a prenup and what are your other assests if you are stashing cash now? How much is the wedding?

[autoxer]

A home equity line might help you pay for short term things, but will hurt your cashflow. Refinancing to reduce your monthly payment might increase your available cashflow by $1k, but the tradeoff is more debt and a longer term, with more money going towards interest.

The HELOC will be tougher in the short term, but better in the long term. Refinancing might give you a little breathing room, but if you are going through $15k - $20k per month, then it is only a fraction of your cash flow. You might be able to free up more cash flow by looking through all of your expenses.

If you want to fix a cash flow problem, taking on more debt is only a temporary fix. If you want a more permanent fix, increase the spread between income and expenses. Criticize your expenses and don't let them rise with your income. Track your spending and look for things that aren't adding so much value to your life.

Good luck and congratulations!

[Petunia 100]

I wouldn't borrow at all. You are at the end of alimony and you have caught up on your taxes. You're going to have more free cash flow, so just increase your cash savings from that.

Why do you have two 25k car loans? Are you paying for your intended's car?

[constancechase143]

My Opinion

In my opinion, after all you’ve been through, why mess with your established assets? Paying your home off in 15 years (while battling a vicious ex and the IRS) is a true feat, don’t rob yourself of those bragging rights. If you’re looking to have some extra money at your disposal, I say get a few unsecured credit cards. You won’t need to put your home or any of the money you’re trying to save up as collateral and you’ll still be able to access money on an as-needed basis. I know how expensive weddings can be! I was in a similar situation about a year ago, I went with this unsecured finance broker at FastUnsecured.com. They took away a lot of the hassle of trying to get extra credit. I didn’t have to pay anything upfront for them to get started and, but the time it was done, I got an extra $80,000 in unsecured credit cards. People are afraid of credit cards because they are tempting but it doesn’t qualify as “debt” until you start spending. With your income and share holdings in those companies, I’m sure you can swing the balance of whatever you spend. Plus, all of my cards started with 12 months interest free. That means you can charge the venue and the menu and pay it off after the honeymoon. Plus, these guys know some type of magic trick that got a few hard inquiries removed from my credit. It’s worth a shot.