What to do with all this debt?

[Anonymous]

Any advice would be greatly appreciated.  I bought a home about a year ago.  It appraised at 220k, and I bought it for 190k.  After I bought it I had a whole range of things happen.  To make a long story short I put over 20k in the house that I didn't have. Now it looks great, new roof, landscape, fence, deck, etc...but I am paying way too much out.  My financials look like this: 55k, yearly income...paying the following:

1509/mo mortgage payment (includes taxes & insurance)

$226/mo 10.5k car loan

229/mo Personal line of credit (10k)

all credit cards are nearly maxed:

3500 NASA Fed

1500 WAMU

500 Cap one

2500 Cap one

2300 Union Plus

I really need to consolidate some debt and lower monthly payment.  Does anyone have ANY ideas?  My ficos are about: 625 EX  640 EQ  645 TU, because everything is charged up so much!

[Anonymous]

whoops, typo...mortgage is 1609/mo...and just to clarify all but NASA are high interest rates.

[laz98]

try & get your interest rates lowered.  that would be my first suggestion.

look at your budget (if you have one), try to squeeze money out of some spots to put towards paying off your debt.

definitely stop using the credit cards.

[marty56]

Using the Debt Snowball approach (name coined but not invented by Dave Ramsey)

 Iwould would make mnimum payments on all CCs except the 500 Cap One, which I would pay extra until its PIF.  Then attack the WaMU card, then the 2300 Union Plus, etc until all the CCs are paid off.  The more "extra" you have, the quicker everything will be paid off. 

The idea is that by paying off the card with the smallest balance first and the the next one down the line, you maintain momentum as you see each card being apid off in turn.  This is what my DMP program did. 

[itzateach]

I just had your same problem but on a flip house. After selling it, it left me with a ton of credit card debt like yours. I just closed 2 weeks ago on a cash out refinance. If you plan on staying in the house awhile, you can use up to 95 percent (I went FHA) of your equity to pay all your debt. I am now at 0 percent util and waiting for my scores to update. I am guessing  close to a 100 point jump as I was 100 percent maxed out on everything. We will see!! Just a suggestion.

[Anonymous]

Thanks for the advice! It is really hard to not use the cards since with the payments I have right now, I am barely squeeking by month to month, and since I have two kids, an agressive paydown this time of year would be hard with Christmas coming up. How do you go about doing a equity/refinance thing? Are their lenders that are more likely to approve? I am not sure how much equity I have with market the way it is.  Like I said, it appraised at 220k a year ago, but I have done ALOT of serious improvement since, so I am hoping it at a minimum held that value.

[MattH]

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@Anonymous wrote:
Thanks for the advice! It is really hard to not use the cards since with the payments I have right now, I am barely squeeking by month to month, and since I have two kids, an agressive paydown this time of year would be hard with Christmas coming up. How do you go about doing a equity/refinance thing? Are their lenders that are more likely to approve? I am not sure how much equity I have with market the way it is. Like I said, it appraised at 220k a year ago, but I have done ALOT of serious improvement since, so I am hoping it at a minimum held that value.

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I don't see the amount of your mortgage principal in your postings, that in conjuction with a realistic market price right now will be key to whether a refinance is possible. The 220K appraisal has zero significance, any lender will basically start from your actual purchase price of 190K and then adjust according to what the general trend has been in your market (you don't say which market). So if for instance your local market has gone down 10% since you bought the place the bank will figure its current value as about 170K, then divide your loan principal by that to get LTV (loan-to-value). If LTV is 80% or less than you may have a good shot at doing a refi, but the higher it is the more difficult a refi would be. As for the 20K of improvements you put into the place, unfortunately in a down market that might add another 10K or so to the bank's appraisal but probably not much beyond that. Even in a strong market most improvements yield at best around 50 to 75 percent in resale value.

As for Christmas, I really hate to say this but from the numbers you give I fear getting out from under your debt load needs to take precedence over Christmas, this year make keeping the house your family's Christmas blessing, you simply cannot afford to dig yourself one iota deeper into the hole under current circumstances.

Message Edited by MattH on 11-02-2008 06:19 PM

[Anonymous]

My only suggestions would be:

1) Ask for overtime, even offering to work in a different area that you have the knowledge of

2) Get a part time job

3) Talk to your bank/credit union about debt consilation on the CC/LOC. They may require you to close the cards.

And of course the other suggestions are good too.

[Anonymous]

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@Anonymous wrote:
How do you go about doing a equity/refinance thing? Are their lenders that are more likely to approve? I am not sure how much equity I have with market the way it is.  Like I said, it appraised at 220k a year ago, but I have done ALOT of serious improvement since, so I am hoping it at a minimum held that value.

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I would avoid at all costs.  If you lose your job and miss a few house payments, you'd face being homeless.  If you lose your job and miss a few credit card payments, you'd be facing higher interest rates and credit limit decreases.  I'd rather keep a roof over my head and work on the credit cards.    Cancel the cable tv and newspapers and get a second job.  Elminate eating out and get creative in your kitchen.  Sell some things you have hanging around - CDs, books, what do you have that might be valuable..? Scale down Christmas.  Home-baked goodies for presents, etc.  People will understand..

If you cannot stop using the cards AND make the minimum payments, maybe your credit union can help.  Or could you sell the car and buy a cheaper one?

[Anonymous]

rmily is correct, do NOT refi.   If you live in a state with non-recourse mortgages, you lose that protection if you refi out of your initial mortgage (refi's are recourse loans - the lender can come after you for the repayment).   You probably can't get a decent equity line these days (with the current credit climate) anyway, so try serious budgeting, credit counseling, GW letters, 2nd job, everything you can think of.  You can get out from under this debt, but it's going to take work.

Good luck!