Need financial advice

Need financial advice

Joined: September 24th, 2009, 3:01 pm

July 24th, 2012, 6:58 pm #1

As our house falls apart around us, we have decided to hock it again.

our current Home Equity Loan is at 8.99%. (we actually found out today it's NOT a home equity loan - it's a personal loan with the house as collateral!)

Hubby applied for a home equity line of Credit - to take out enough to cover the existing Home Equity Loan and 10K to fix the house would increase our monthly house payments by about $30.

the interest rate offer is thus:

option A - Lock in at 4.24% now for the life of repayment (this correlates to the payment amount above)

Option B - take 2.49% for up to a year then lock in at prevailing fed rate plus 1% (we have the option to lock in at prevailing rate plus 1% at any time during that year.

So which do we go with??

Term - 5 years for the balance of the current home equity loan (aka the remaining term of the original loan). 15 years for the extra 10K. no penalty for early re-payment unless it's in the 1st three years. no closing costs (only cost to us would be if the appraisal costs more than $300 we pay the difference bt cost and $300 - which the bank says they use pretty cut rate appraisers and almost never go over!)

All of this is of course predicated on qualifying for the loan.

If all we took out was the balance of the original loan - we'd lower our monthly payments by $50. Too bad the porch is falling off the house (and we may have termites) and the roof still hasn't been fixed. a prayer or two that we can manage to get approved would be good too.
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Joined: May 21st, 2006, 4:46 am

July 24th, 2012, 9:04 pm #2

I would go with the fixed rate. I am not a big risk-taker when it comes to money, and the fixed rate is pretty low. I would NOT take 15 years to pay off the extra $10K, and you shouldn't plan to, either. So, is there a prepayment penalty if you, say, pay it off in 5?

I would also make a list of EVERYTHING the house needs, and take care of it at once, even if it meant borrowing more. Fix what needs fixing. Also, is any of this work you can do yourself?

I make rules for myself all the time. My rule would be that I HAVE to get serious about snowballing debt, with a written budget. I realize you aren't supposed to go into more debt while you are snowballing, but I believe you when you say that your front porch is falling off the house. Make this the impetus to get out of debt once and for all...whatever it takes.

I would like to see what others think about this. We live for this stuff!
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Joined: May 21st, 2006, 4:46 am

July 24th, 2012, 9:09 pm #3

Do you have anything you can sell to either reduce the amount borrowed, or eliminate the need to borrow altogether? I realize you may not wish to sell what it is that you might have...but you gotta do what you gotta do.
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Joined: August 3rd, 2010, 6:06 pm

July 25th, 2012, 12:01 pm #4

Agree with Max, the current economy stinks and I've always been leary to variable rates so I'd lock in and know ahead of time exactly what I would be signing on for. Agree also to make a list of NEEDS (sorry but the I'd love a hot tub isn't a need-just an example!) and maybe whittle that list down to essentials: roof, porch, redo bath (modestly) kind of a deal. I also agree to crunch the numbers and see if you can't refi for a 5-10 year time frame vs 15. Depending upon your age, this is a consideration. HTH
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Joined: May 30th, 2006, 2:01 pm

July 25th, 2012, 12:47 pm #5

I would go with the fixed rate. I am not a big risk-taker when it comes to money, and the fixed rate is pretty low. I would NOT take 15 years to pay off the extra $10K, and you shouldn't plan to, either. So, is there a prepayment penalty if you, say, pay it off in 5?

I would also make a list of EVERYTHING the house needs, and take care of it at once, even if it meant borrowing more. Fix what needs fixing. Also, is any of this work you can do yourself?

I make rules for myself all the time. My rule would be that I HAVE to get serious about snowballing debt, with a written budget. I realize you aren't supposed to go into more debt while you are snowballing, but I believe you when you say that your front porch is falling off the house. Make this the impetus to get out of debt once and for all...whatever it takes.

I would like to see what others think about this. We live for this stuff!
to get the house in a condition that you could sell it? Maybe it makes sense to think about selling and renting for a while. Maybe that's not possible. I know that many houses are underwater right now.

I agree with the others, borrow enough to fix the house. Before you borrow, you might need to get bids, etc. Perhaps get enough to get some insulation in the house, which would ultimately save you money and increase your comfort level dramatically.

I don't have an opinion on the fixed vs non-fixed.

Good luck! We're hoping to get an appraisal next week. We've been working on major projects for the last 4 months. It's been a lot of work. Our fingers are crossed!
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Joined: May 21st, 2006, 5:50 pm

July 25th, 2012, 2:02 pm #6

As our house falls apart around us, we have decided to hock it again.

our current Home Equity Loan is at 8.99%. (we actually found out today it's NOT a home equity loan - it's a personal loan with the house as collateral!)

Hubby applied for a home equity line of Credit - to take out enough to cover the existing Home Equity Loan and 10K to fix the house would increase our monthly house payments by about $30.

the interest rate offer is thus:

option A - Lock in at 4.24% now for the life of repayment (this correlates to the payment amount above)

Option B - take 2.49% for up to a year then lock in at prevailing fed rate plus 1% (we have the option to lock in at prevailing rate plus 1% at any time during that year.

So which do we go with??

Term - 5 years for the balance of the current home equity loan (aka the remaining term of the original loan). 15 years for the extra 10K. no penalty for early re-payment unless it's in the 1st three years. no closing costs (only cost to us would be if the appraisal costs more than $300 we pay the difference bt cost and $300 - which the bank says they use pretty cut rate appraisers and almost never go over!)

All of this is of course predicated on qualifying for the loan.

If all we took out was the balance of the original loan - we'd lower our monthly payments by $50. Too bad the porch is falling off the house (and we may have termites) and the roof still hasn't been fixed. a prayer or two that we can manage to get approved would be good too.
If I remember correctly from some of your past posts I would include:

1. roof
2. new furnace and ductwork
3. insulation upgrade all over the outside and attic...include the basement
4. possible new siding
5. fix the porch
6. pest control for termites etc.


Then I'd add stuff like:

1. upgrade the bathroom
2. add a two-piece someplace in the house
3. finish the basement perhaps
4. garage


Get contractors to give written estimates of costs and take it to the bank to show them what needs to be done. I'd include pictures of the existing space as well. Get the money on a fixed rate and get that house fixed. Don't use the money for anything else but getting the house fixed.
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Joined: September 13th, 2009, 2:19 am

July 25th, 2012, 2:50 pm #7

I like that list. Take it one project at a time, as long as the repair / upgrade budget holds out. But make sure the first ones you do are the most critical ones.
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Joined: May 21st, 2006, 4:46 am

July 25th, 2012, 3:17 pm #8

As our house falls apart around us, we have decided to hock it again.

our current Home Equity Loan is at 8.99%. (we actually found out today it's NOT a home equity loan - it's a personal loan with the house as collateral!)

Hubby applied for a home equity line of Credit - to take out enough to cover the existing Home Equity Loan and 10K to fix the house would increase our monthly house payments by about $30.

the interest rate offer is thus:

option A - Lock in at 4.24% now for the life of repayment (this correlates to the payment amount above)

Option B - take 2.49% for up to a year then lock in at prevailing fed rate plus 1% (we have the option to lock in at prevailing rate plus 1% at any time during that year.

So which do we go with??

Term - 5 years for the balance of the current home equity loan (aka the remaining term of the original loan). 15 years for the extra 10K. no penalty for early re-payment unless it's in the 1st three years. no closing costs (only cost to us would be if the appraisal costs more than $300 we pay the difference bt cost and $300 - which the bank says they use pretty cut rate appraisers and almost never go over!)

All of this is of course predicated on qualifying for the loan.

If all we took out was the balance of the original loan - we'd lower our monthly payments by $50. Too bad the porch is falling off the house (and we may have termites) and the roof still hasn't been fixed. a prayer or two that we can manage to get approved would be good too.
I stand with my first opinion, but I've been giving it some thought. Can you repair the porch, rather than replace it? Ditto for anything else that needs doing. We have friends who are doing major structural repairs this summer on a deck that would be a LOT easier to replace. I know jobs like that are a lot of work, but it could be significantly less expensive. Also, how much work can you do yourselves? Even if it means taking some time off work without pay (better if you've got paid vacation).

My house isn't falling down around me, but it is 15 years old and has had some deferred maintenance. We have made a list of every single thing that needs doing--big or small--and are working our way through it. Regardless of what you do, this might be a good idea for you, too.
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Joined: May 25th, 2006, 12:07 am

July 25th, 2012, 6:04 pm #9

As our house falls apart around us, we have decided to hock it again.

our current Home Equity Loan is at 8.99%. (we actually found out today it's NOT a home equity loan - it's a personal loan with the house as collateral!)

Hubby applied for a home equity line of Credit - to take out enough to cover the existing Home Equity Loan and 10K to fix the house would increase our monthly house payments by about $30.

the interest rate offer is thus:

option A - Lock in at 4.24% now for the life of repayment (this correlates to the payment amount above)

Option B - take 2.49% for up to a year then lock in at prevailing fed rate plus 1% (we have the option to lock in at prevailing rate plus 1% at any time during that year.

So which do we go with??

Term - 5 years for the balance of the current home equity loan (aka the remaining term of the original loan). 15 years for the extra 10K. no penalty for early re-payment unless it's in the 1st three years. no closing costs (only cost to us would be if the appraisal costs more than $300 we pay the difference bt cost and $300 - which the bank says they use pretty cut rate appraisers and almost never go over!)

All of this is of course predicated on qualifying for the loan.

If all we took out was the balance of the original loan - we'd lower our monthly payments by $50. Too bad the porch is falling off the house (and we may have termites) and the roof still hasn't been fixed. a prayer or two that we can manage to get approved would be good too.
especially since everyone knows I'm bankrupt. But I can't be a good example so I strive to be a horrible warning. I don't think a HELOC is the same in Canada so I'm not certain that I fully understand what it is that you are saying.

Personally I didn't like any of the choices that you got from the bank so to answer which would I choose? None.

Have you done the math on what the $10,000 plus whatever other money on the other loan will cost when it is all paid out?

Taking out debt against the equity in my house would be the very, very, very last thing I would do after EVERYTHING else failed. I mean I would sell everything that isn't nailed down or necessary to life, cut expenses to the bone, get a second job, etc. I would also look at moving and believe me I don't say that lightly! There are people here who can describe a younger me who was entirely focused on living in my own home. Yeah, well not anymore! Now I'd rather have some money in the bank and a stable financial future!

That is just what I would do. My 'advice' to you would be like the other people are saying. Make a realistic list of what it will take to fix the things you REALLY need fixed. For example- if you have no furnace and you live where there is winter you will need a furnace. The roof is leaking- that needs to be fixed.

I would say to take on the smallest amount of new debt possible and pay it off as soon as possible.


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Joined: May 25th, 2006, 12:07 am

July 25th, 2012, 6:09 pm #10

I stand with my first opinion, but I've been giving it some thought. Can you repair the porch, rather than replace it? Ditto for anything else that needs doing. We have friends who are doing major structural repairs this summer on a deck that would be a LOT easier to replace. I know jobs like that are a lot of work, but it could be significantly less expensive. Also, how much work can you do yourselves? Even if it means taking some time off work without pay (better if you've got paid vacation).

My house isn't falling down around me, but it is 15 years old and has had some deferred maintenance. We have made a list of every single thing that needs doing--big or small--and are working our way through it. Regardless of what you do, this might be a good idea for you, too.
Unless you are very handy I wouldn't take time off work as a way to save money in home repairs. You need to do the math on how much it will cost to pay someone and how much it will cost to do it yourself.

Getting me on a roof is not going to save anyone any money or any stress! But I can be useful in demolition...
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