Second Mortgage Shop

I can't do bankruptcy because it affects my wife's credit. My credit score is very very bad, so I cannot get a consolidation loan. I don't own my own house, so I am unable to get an equity loan. I'm running into walls here, and I need help. Thanks!

Step 1. Pay your debts on time.
Step 2. Organize your debts from least amount to greatest.
Step 3. Pay the minimum amounts required on your debt except for the account with the smallest balance.
Step 4. Pay at least the minimum on your smallest amount and as much as you can each month in addition until that card is paid off.
Step 5. Take the entire amount of money you had been paying on your smallest account and apply it, per month, to your next account with the now smallest amount.
Step 6. Lather, rinse, repeat. This will create a snowball effect and get you out of debt.

I believe I got this from Dave Ramsey. There are other theories out there, but this one has a psychological effect to help keep you going as you're making visible progress to help keep it up.

There are a couple of personal finance blogs that you can go to for further resources:
http://www.getrichslowly.org/blog/
http://www.iwillteachyoutoberich.com/
http://www.daveramsey.com/
and the forums over at the motley fool
http://www.fool.com

If you decide to go the credit counselor route, be sure and pick a non-profit organization. All credit counselors are NOT the same and there are a lot of scam artists out there.

Good luck!

Is there a better option? My credit union is offering a consolidation loan and telling me that the average in our area is about 13.87 percent.

A home equity loan if often touted as a good way to pay off credit card debt, especially in areas where homes have greatly increased in price; however, you should know that technically, the interest on such a loan is NOT considered deductible by the IRS unless the loan is used to improve the property. It's likely that you could claim it anyway without the IRS auditing you, but it could happen, and in that case, you'd have to pay any back taxes plus interest to the IRS. This is a position you seriously want to avoid.

Secondly, you're betting against your house that you can afford to pay this loan, Are you willing to close all the credit accounts if you take this loan, so you won't be tempted to run the balances up again? You won't have a way to pay them off again if you do.

Remember that you're possibly putting yourself in the position that, should you need to sell the house for some reason, that you'd lose the equity you've gained over however long you've owned it. Is this a good risk?

I have done this, and not long afterward, the prices of houses in my area dropped. I was stuck for quite a while until prices went back up, since I'd have to pay the balance on the first mortgage plus the balance of the home equity loan, and when prices finally went back up far enough that I could afford to sell, I got far less when I sold my house than I could have.

So, unless you can very quickly pay off the home equity loan, and you know you can resist using your other credit again, it's risky.

I am a first time home buyer and I want to be informed as possible.

To buy a home in the first place, you would have to take out a mortgage, pay thousands in closing costs, get a deed and you own the property, subject to making your mortgage payments. If you have equity in your home, that is some of the loan is paid off, you can borrow money based on home much ownership you have, that is a Home Equity loan. Or, you can set up a home equity line of credit. If you own your home or part of it, you can open an account where you write checks to borrow money up to the limit of your home equity line of credit.

I have a mortgage of 200K.I have a first mortgage of 160K at a fixed rate of 5.785% over 30yrs. and the 2nd one's 40K at 9.00% fixed.Now,the value of my place went up to about 350K in the last 4 years.Should I stay with my current plan or should I re-finance? And if I do,which way should I go? Home Equity loan or Home Equity line?

With $160k @ 5.785% and $40k @ 9.00% fixed, your blended rate is 6.428%. So if you were to refinance both mortgages, you should look for a rate that is lower than that. If you were to refinance just your 2nd mortgage, you should look for a rate that is lower than 9%.

If you were to refinance both mortgages, you wouldn't get either a Home Equity Loan (HEL) or a Home Equity Line of Credit (HELOC). You would get a new first mortgage, that would replace both of your current mortgages.

If you just want to refinance your 2nd mortgage, you could go with either an HEL or a HELOC.

HELs are generally fixed rate mortgages, like your current 2nd mortgage. They are for a single amount, and cannot be borrowed from again.

HELOCs are lines of credit that usually have variable rates, often based on the prime rate (i.e. prime + 1). For the first 5 - 10 years, you can borrow money agains the HELOC, often just by writing a check or using a debit card. During the time that you can take additional money out of the HELOC, you usually only have to pay the interest on the money that you have borrowed. Once you can no longer borrow money, the loan payment schedule will reset and you will have to start paying back principal, as well as interest. This can cause your payment to go up significantly.

Which type of loan you should get, or if you should stick with your current loan structure really depends on what you are trying to do. Would you rather have one loan or two? Would you rather be able to draw money out if you need to, or not?

My husband and I are in our late fifties. He is disabled and is on a set income. We only make enough money to pay a our bills. There is very little money left over for gas, groceries or everyday living. We owe 25,000 in credit card debt and have about 30,000 in equity in our house.

If you took out the loan could you make the payment? If so I say yes its a good idea. Good luck!