Want to refi heloc... should I pay off my only CC first?

[Anonymous]

Hi all,

I am hoping someone here can offer some advice on how I should proceed. Any help is greatly appreciated. (this is my first post btw)

This is me in a nutshell:
Fico Score: 667
Age: 25 (one of the reasons my score is low, according to myFico)
I have a single 30 day late charge reported on my CC (the one mentioned below) from 2001.
Within the past 12 months I co-signed with my brother to purchase his first home (we closed in Jan). The credit inquiries from that have affected my score also, according to myFico.
My one CC has a limit of 6000 and a balance of 4100.

I purchased my first home over 2 years ago with an 80/15 (30 yr fixed for 80% plus 15% as a HELOC). The HELOC is now up to an astounding 12.3% on a 28,000 balance. The interest payment each month is hovering just over 300 dollars! Its tearing away at my insides, I must get rid of it, just like the CC balance.

I have watched the sale of a few comparable houses in adjacent streets over the past year, and looking at it very conservatively, I believe that I am sitting on about 40,000 in equity (about 29% of what I owe in total for both mortgages). I would like to refinance for the purpose of getting rid of the HELOC and consolidating the house payment into one monthly payment on a 30 yr fixed. I do not wish to take out any of the equity as cash and I would like to see a rate around 6.25 or lower of course (but I expect low sixes)... the rate I have now on the 30 year fixed is 5.75.

So here are my questions:
Should I wait until I can have my CC paid down to within 10% of the limit to pursue the refinance?
According to what I have read in some posts on these forums, couldn't I try to get a CLI on the CC and reduce the ratio of balance/limit?
Would that be worth while even if I could double the credit limit to say, 12,000?
Would doing that before trying to do a refinance affect my ability to get approved?

I hope I didn't drag this out too much, but I wanted to lay out as much info as I could to get the best responses from you guys.

Thanks in advance,
Rob

[Anonymous]

This is exactly what I do all day long!!

If I where you I would refie just the 2nd. You can do that with no closing costs or any fees, if you refi your 1st mtg you will have closing costs and you will lose the 5% rate. Refiing the 1st would only make sense if you needed a lower payment on it or if it was an ARM (adjustable rate).

Paying off your credit would only matter if it will increase your FICO or if your DTI (debt to income - how much monthly debt/payments show on your credit divided by your gross income) is too high.

If you want to discuss the details with me you can send me a msg and I'll give you my work phone number.

[Anonymous]

Great, thanks for the reply!

I wasn't sure if I could refi just the second so thats great. I would hate to loose that low 30 yr fixed rate I have on the first.

How would I refi the second for no closing and no fees? I thought it always costs a couple thousand to do a refi?

[Anonymous]

UPDATE:

I refinanced my second loan (was a HELOC) into a fixed 30 year loan. Because the value of my house has gone up over $60k in 3 years, I was able to wrap up the $4k to pay off my credit card as well as get another $4k to pay a down payment on used car for my wife. That leaves me with no debt other than my house, and the car we are buying next week with the $4k!

All of this and my monthly payment for the 2nd mortgage dropped! So not only am I saving on the $200 a month for the credit card, now I am also getting $4k cash for the down payment and paying $100 less a month on my second mortgage payment.

As a side note, I was able to squeeze $100 a month out of Sprint by simply downgrading my wife and my cell plans and wrapping them into a family plan. So after all of these things, I enjoy a LOT of extra cash available for other things each month now.

I hope this inspires someone to take a good look at what they are spending each month to see if there is anything that can be done. Its amazing how much money you can save just by reorganizing things a bit.

Take care,
Rob

[SoulSmilen]

Standing ovation!!!! Bravo, Bravo!!!!

VERY well done!

[SmartCookie]

Hey WOW!!!!  Congrats!

That's impressive at 25.  BTW FICO doesn't care about your age, just your oldest accounts.

Now teach your brother and get off his paperwork!!!   

Seriously, that's great for you and your wife.  I'm happy you updated us!