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pay off home with personal loan

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pay off home with personal loan

I have a great relationship with my credit union with excellent credit and retirement income.  Just wondering in anyone's opinion,  would a cu  consider a consolidation loan to pay off  my home which is 190k?  The reason why is  I have been trying to refinance my rental since 2009 with no luck!  Back then my dti was about 169% LTV and now I have about 25% equity but can never meet the requirements to refinance and I am in an arm thats been adjusting every six months upward!  Good credit I found out is not quite the answer but LTV is.  Back during the housing crash when most may have been walking away from their mortgages, I was one that kept making payments even though some suggested, stop making your payments and you'll get some help which turned out to be the truth!  I would save quite a bit in interest of course and my dti would hover around 44% and it is about 42% now.  I have been desperate to fix my rate but just can't do it.  My LTV continues to hover above the 80% threshold which no one would touch me unless I'm about 75%. I believe on a consolidation you have to tell them what your consolidating??  Depending on what type of replies and or suggestions I potentially get from this thread on whether this is a feasible or practical to request, I will personally go and talk with them face to face.

Message 1 of 7
6 REPLIES 6
Established Contributor

Re: pay off home with personal loan

To be clear, you're thinking that your CU is more likely to offer you a 190k unsecured personal loan than they are a 190k secured mortgage refi?

 

That seems... highly unlikely.

 

What could be more practical in your case (not knowing the actual APRs involved, the ARM cap you have, or your tax/income situation), is taking out a personal loan for just the amount required to get the loan into a refi-able range, and then doing a refi on the rest. But that would depend on the actual numbers involved here.

EQ8:850 TU8:850 EX8:850
EQ9:850 TU9:850 EX9:850
EQ5:809 TU4:789 EX2:819 - 2019-09-06
Message 2 of 7
Legendary Contributor

Re: pay off home with personal loan

Unless the creditor pays the existing loan as part of the personal loan approval, you are increasing your overall debt, and thus are not likely to qualify for an unsecured personal loan of that amount.

Will the personal loan involve the CU paying the current mortgage loan without your involvement?

 

Additonally, a personal loan implies their is no mortgage lien, and thus is a much, much higher risk for the CU.

They will most likely only consider refinancing as a mortgage loan, thus securing their investment with the ability to foreclose if you become delinquent, and thus recoup most of their potential loss.

 

A personal loan would not appear, from the perspective of the credit union, to be a prudent alternative to a mortgage loan.

Message 3 of 7
Frequent Contributor

Re: pay off home with personal loan

Thanks for both replies which are honest and realistic.  I think the option to do a personal loan to get the balance down to do a refi may be the best option.  I'm with NFCU and I have paid them back a 30k in 2013 over a 12 month period and recently a 20k loan over a 60 month term.  This option will drive up my dti adding a personal loan so I have to be careful.  What do lenders typically look for with dti or are they a little more lenient with members who have shown high responsibility and outstanding credit and income?

Message 4 of 7
Senior Contributor

Re: pay off home with personal loan

I don't know too many lenders that would offer a $190k "consolidation loan" for 20-30 years.

 

In addition, real estate interest is deductible as is depreciation on a "rental" along with maintenance costs, etc. Once it becomes a personal loan it becomes more difficult to establish the "business side" versus the personal side. I think a better approach would be to pay the balance down to a level that is comfortable to refi at a fixed rate to the lender. Chances are that you could borrow against your retirement funds (guaranteed approval) and use that money to get your refi request into a range that would satisfy a fixed rate mortgage or perhaps a 5/5 variable (giving you 5 years between adjustments).  

Message 5 of 7
Super Contributor

Re: pay off home with personal loan


@babbles wrote:

I have a great relationship with my credit union with excellent credit and retirement income.  Just wondering in anyone's opinion,  would a cu  consider a consolidation loan to pay off  my home which is 190k?  The reason why is  I have been trying to refinance my rental since 2009 with no luck!  Back then my dti was about 169% LTV and now I have about 25% equity but can never meet the requirements to refinance and I am in an arm thats been adjusting every six months upward!  Good credit I found out is not quite the answer but LTV is.  Back during the housing crash when most may have been walking away from their mortgages, I was one that kept making payments even though some suggested, stop making your payments and you'll get some help which turned out to be the truth!  I would save quite a bit in interest of course and my dti would hover around 44% and it is about 42% now.  I have been desperate to fix my rate but just can't do it.  My LTV continues to hover above the 80% threshold which no one would touch me unless I'm about 75%. I believe on a consolidation you have to tell them what your consolidating??  Depending on what type of replies and or suggestions I potentially get from this thread on whether this is a feasible or practical to request, I will personally go and talk with them face to face.


You can't replace a 190k mortgage with a 190k personal loan; isn't going to happen.

 

If you think that the loan-to-value ratio is what's holding you back, then you should pay down the loan ahead of schedule.

 

Getting new loans isn't going to help you.

 

Despite your great relationship with your credit union you might want to look into refinancing with another credit union that is not so conservative. It's a very competitive market.

 

 


Total revolving limits 720500 (594000 reporting) 10/2/19 FICO 8 scores: EQ 744 TU 782 EX 746
Message 6 of 7
Super Contributor

Re: pay off home with personal loan


@babbles wrote:

Thanks for both replies which are honest and realistic.  I think the option to do a personal loan to get the balance down to do a refi may be the best option.  I'm with NFCU and I have paid them back a 30k in 2013 over a 12 month period and recently a 20k loan over a 60 month term.  This option will drive up my dti adding a personal loan so I have to be careful.  What do lenders typically look for with dti or are they a little more lenient with members who have shown high responsibility and outstanding credit and income?


It will also give you a new inquiry, shorten your age of newest account, shorten your average age of accounts, and raise your installment utilization percentage.... so it will lower your credit scores. Which will affect your ability to refinance, and the rate at which you can do it, too.


Total revolving limits 720500 (594000 reporting) 10/2/19 FICO 8 scores: EQ 744 TU 782 EX 746
Message 7 of 7
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