Bad Credit? - Repair it here yourself!

There're many reasons you may want help for bad credit. We're here to help you understand what affects credit, what makes credit bad, how and what entities define your credit, guide you through the credit definitions, financial concepts, common misconceptions and provide you with information and tools that will help to solve your credit problems. Get help for bad credit now! To achieve this, we provide you with Free Access to a wealth of credit related content, forms, tools and calculators. We show you how to improve your bad credit step by step, reestablish your ability to borrow monies, how and where obtain loans, credit cards, mortgages and other financing. Repair Credit now!

Debt help with mortgage refinancing

Tue Feb 14, 2006 01:02PM | By Tony

See more in Debt Relief | Permalink | Email |

Debt help question from the consumer who accumulated $36,000 !!! on 7 credit cards. Amazingly high FICO score to go with that.

Q: I need pay off my credit cards, at least most of the $36,000 in debt I carry now. I need some help in deciding on what to do. Here is my situation: credit scores are 678, 695, 698. My husband has no debt, so no help needed .. lucky him. We have $150,000 mortgage and the house was appraised at $289,000. We both teach high school and make $85,000 together. My husband pushing me to refinance, take cash out and pay off the cards. Plus he wants me to close them afterwards. Other thing, my mortgage rate is 5.625% on 30 year fixed mortgage, and I want to get an ARM, may be 3 year to keep the rate close to what we have now. He insist on taking another 30 year fixed mortgage. We love the area and plan to stay in the school district till we retire, which is far fetched, something like 14 years. What should we do?

A: Debt help is easiest with cash out refinance, your husband is correct here. I am impressed how you have kept your credit in check, if not your spending. Do the refinancing and pay off your debt but leave at least couple credit cards open. You obviously have a very high credit limit on them, so keeping them open but not charging more than 35% of that credit limit will not only keep future debt in check, but also help you push your credit score even higher.

As far as taking 3 or even 5 year ARM over 30 year fixed, I would agree with your husband. Short-term interest rates have moved up faster than long-term rates and the difference between 5/1 ARM and 30 year fixed rate mortgage is small. In some banks these rates are ridiculously close. If you can get 30 year fixed around 6.125 - 6.25% and I don't see the problem here, go for it. I would even consider 15 or 20 year fixed rate mortgage since you will free so much money after getting your debt help.

Let say that you roll closing costs into new mortgage so I round it up to $190,000. Your Loan To Value ratio will be roughly 66% - $190,000 in new mortgage divided by $289,000 in home value.

With 30 year mortgage, at 6.125%, you would pay $1,154.46.
With 20 year mortgage, at 6.00%, you would pay $1,361.22, roughly $207 more, all towards your principal.
With 15 year mortgage at 5.75%, you would pay $1,577.78, roughly $423 more, again, all towards your principal.

See what both of you are comfortable with. Rates I put are pretty close to what the market dictates now. Also, by rolling the closing costs into the mortgage, you broker doesn't have to cover them, so do insist on the lowest rate. Get at least 3 quotes.

Some debt help here, you pay off high interest no tax deductible credit cards and switch to the shorter mortgage amortization and enjoy tax benefits. See similar recent answer on debt relief and home equity loan. Of course it is better not to be in debt at all. Check on how to become debt free.