KristinaRM asked:
Due to family health issues my husband and I have missed a bit of work over the past 9 months. Because of this a few of our credit card payments were missed and we have fallen quite behind. We are now both back to work full time and are making arrangements with our creditors to try to lower our monthly payments. I have not contacted our mortgage company yet to see what they offer because I am not savvy enought to know the difference. In this situation, which would be better?
MALCOLM
Due to family health issues my husband and I have missed a bit of work over the past 9 months. Because of this a few of our credit card payments were missed and we have fallen quite behind. We are now both back to work full time and are making arrangements with our creditors to try to lower our monthly payments. I have not contacted our mortgage company yet to see what they offer because I am not savvy enought to know the difference. In this situation, which would be better?
MALCOLM
DERICK
If your credit score has dropped considerably you probably won’t be able to get either one. It’s time to give your mortgage company a call and find out for sure.
KRISTOPHER
I would look into a possible FHA loan, it will be quite tough for you to get a HELOC with the late payments. Most lenders have a maximum of deragetory payments in the last 12 months. I would look at refinancing into an FHA loan… You can go to 95% of your homes value and get a considerably low interest rate given the current credit situation 888.218.1071 we lend in all 50 states
LUCIANO
It depends. If your credit scores have been hurt, neither a refi nor a home equity loan may be an option. If your current interest rate is at least 2% higher than the new interest rates, it may be best to refinance. If your house has gone up in value, you may qualify for a home equity loan. The equity must be at least enough to allow an additional loan. 2 years isn’t very much time for a house to increase in value in most areas.
Your best option is probably to work on getting your credit card and other payments back in line rather than trying to get more money out of your house. That only increases your debt level. Studies show that persons who do debt consolidation are usually right back in financial trouble within 5 years. And don’t forget that you will be paying for that credit card balance for the next 30 years if you roll it all into the mortgage.
WYATT
your house is probably worth less than when you bought it due to the downturn in the real estate mkt the last 2 yrs – I’m sure mine is and I bought a lower priced house
EDGAR
Well, it really depends on quite a few factors. First, like many others said, if your credit score has fallen you may not be able to qualify for either.
Also, there is a big difference between the two programs you’re asking about and you need to be aware of that. When you refinance, you are basically getting a new loan for more favorable terms (lower interest rate etc). Your first loan is paid off and you now have only the new loan but typically no money in pocket. With a home equity loan (or line of credit) you are using the equity in your home to get a new additional loan. So say, you have a first mortgage of $200,000 but your home is actually worth $250,000. If you’re credit is sufficient AND your income can justify another payment, you could get a loan (lump sum) or a line of credit (like a credit card . . . only pay when you use and if you pay it off it becomes available again) and you can use either funds how you would like.
Now, the problem with the housing market right now is that a lot of homes don’t have any equity to tap into and this could hurt you in both cases. With a refinance, the bank will want an appraisal and if you owe $200,000 on your first loan, but now your home is only worth $170,000, you will not be able to pay off that first loan with the new loan. (A mortgage company with only loan what the home is worth or the asking price during a purchase, whichever is lower). Same thing with an equity loan . . . if there is no equity, there is no loan.
If you happen to have a lot of equity in your home, and only need to tap into a bit of it, you may have a small chance. Don’t be afraid to talk to a bank or mortgage broker. A professional will be happy to inform you of your options with many different programs.
Yet, when you’re already behind on your bills the worst thing to do is create more bills . . . you want to avoid paying for borrowed money with borrowed money. I suggest you contact any company you are behind with and make payment arrangements. Typically, if you have a reasonable excuse, they will work with you. Financial institutions do not want to be in the real estate business, so they should be willing to avoid foreclosure as long as you are reasonable in your expectations (you will most likely have to pay a chunk of the past due balance up front). Hope this helps.
RILEY
I don’t know a whole lot about mortgages, except that I’m going to have one in a month from now… but I found a guide on how to pay off a mortgage quickly without sacrificing spending cash and emergency cash…. . It might help you, but I don’t know your whole situation.