In short, we have a 200,000 home (bank appraisal) with a 100,000 mortgage on it.

We have approximately 20,000 in loans/credit cards with most of it at a high %, total monthly payment is a little over 600

 Decent credit, for now we're making all the payments on time, but I'm concerned that once the heating oil season starts we'll have to chose to pay CCs or to buy oil. 

 We could get a home equity loan for about 6.5% with a 15 year term, no prepayment penalty, that would make our monthly payment under 200. Through our credit union, there are no closing costs at all.

 Complicating matters, we have an extra property on the market right now that, when/if it sells should net us about 50K. But it's turning out to be a very hard sell, so I don't feel we can count on that as anything other than another expense (insurance/taxes - it's paid for) right now.  Once sold we would use the money from the sale to pay off the equity loan.

Looking for opinions about taking out the home equity loan to make it easier until the real estate sale of our spare property comes through.

Hard to say . . . but I never think accessing home equity is a great idea.  Lots of people do it though, so I may be in the minority.

What I was going to suggest is if you have any balance transfer offers you could consider-even if it means getting a new card/opening a new account to get the transfer offer.  That way, your payment will go more towards the principal and when/if your other property sells, you can then pay off that loan as planned.  Your credit union may have a rate for a personal loan of some kind that is fairly comparable to the nome equity line.

Am interested to see what others think . . . but just was thinking that if paying it is a concern, it would be horrible to have the debt attached to your home-an asset that could be taken away for failure to pay the bill.  Also, by arranging a 15 year payment plan, even with a lower interest rate, a lot of money will go to interest; more than if you got a balance transfer or lower interest personal type loan for 5 or so years.

Just my two cents!  By the way, welcome to the group!

I agree acessing home equity is not a good idea.  I did it and I am sorry.  It just changed the debt, not the problem.  I think you can just go after that debt with any and all extra money, get rid of it and then you will be so happy that you have left your home alone.

Speaking from experience!  ;-)

good luck! 

 

 I have to agree with jennylyn. Moving unsecured debt to secured debt can be dangerous territory. Home equity loans can cause trouble even in the best of times because things change. If you couldn't make the payment on a home equity loan, you could very well lose your house. Also, as jennylyn pointed out, paying a loan over 15 years is going to cost you some serious interest. 

Are you paying the minimum due on the credit cards?  If you can raise that, the cards will be paid off sooner and your minimum payment (in case of a bad month), will drop. Bankrate has a nifty little calculator that will help you see how paying a little extra will make a big difference: http://www.bankrate.com/brm/calc/MinPayment.asp 

If you're afraid of higher costs this winter, now is the time to pay down the credit cards so you can handle it better. Could you rent the unsold property and use that to pay down the credit cards? 

I agree with Pat.  Pay as much as you can now -- over and above the minimum as much as you can afford -- and, if you have to, later pay the minimum while you're heating your home.  Once it warms up again start paying them to the maximum you can afford.  I can understand your concern; we don't use oil to heat but I've heard the projections for how much it's going to cost this winter.

I don't know about the US but I think the home equity lines of credit work different here.   We have to pay just the interest monthly and it is up to us to pay the balance down.  like the mortgage payment it comes straight out of the bank account.  There is a limit too. You can only get up too 65% of your available equity in your place.  They make you clear off your credit card debt by transfering to the line of credit. Also you don't have to get the full line of credit that is available to you. We could have gotten a way larger line of credit then we did.

 Both our line of credit and mortgage is with the same bank.  I think Canada is more strigent in getting credit.  Our debt with mortgage is only basically half of what the place is worth.  P

at the moment it is helping us. instead of paying 10 - 15% percent, we are paying 4.75%.  Instead of paying more interest, we can pay the extra on the line of credit.

I would go searching for a better deal on your credit cards - if you can consolidate them, even if the average interest isn't any better, that should lower your minimum payment, and then you can overpay the minimum to bring the balance (and the minimum payment) down faster.  Remember that the more you pay down a credit card the lower the minimum payment is - but a home equity line of credit, or a second mortgage, is going to have the same minimum regardless of the outstanding balance.

The danger with home equity lines of credit is that they suddenly open up all the maxed out credit cards to be used again. And suddenly your equity in your home is diminished, so if housing values drop then you may find you cannot sell your home for enough to even pay off the mortage and the HELOC.. IF you could pay off the loans and cards and NEVER, EVER touch them again, then maybe. It takes a lot of willpower, willpower that many don't have to cut up the credit cards. best to you and yours. peace.

I also agree with the others. If it is possible to find a way to pay off the CCs in less time than 15 years, even with a higher interest rate, the overall cost may be less. And tapping into home equity is something to be avoided if at all possible - the goal is to be debt free, not dig the hole deeper while putting your home at risk.

Even if the other property is hard to sell, is there equity in that that you could get a loan on if this is something that you'd be willing to write off? You might get lucky and sell it (don't count on that though) and be able to pay off everything but your main home mortgage.

Thanks everyone, I have a lot to think about now.

 Firstly, taking a loan out on the equity of the other property is something to think about, but I *think* due to the nature of the property it might be hard to do, and also I'm not sure if that would qualify for no closing costs & a low % rate. But it is something I hadn't considered, thank you.

 My husband and I are committed to not using credit anymore. All of our cards have been sliced, with the exception of one that's on ice in the freezer, to be used for car rentals for future vacations. I was surprised last time we went that the rental people didn't want to accept a debit card! So we need to keep that one for that purpose only. We've not charged anything for the last six months, so I do think we can live like this without a problem.

 Someone asked what might happen if we, for some reason, were unable to make the home equity loan payment. That's where we would call on our safety nets, namely our parents. Both sets are quite well off and would have no problem assisting us with payments. In fact, my dad wants to give us a "loan" to pay off the debts that we have now, but I hate accepting money from him. We made this mess and we aren't going to learn from it unless we dig our way out of it. Of course, it's VERY nice knowing that our parents are there if we absolutely need them, but it makes me sick to see other family members mooch off of them and I can't do that unless it's absolutely needed. Pride is such an expensive thing! And of course, worst comes to absolute worst I could get a job nights. Right now I just stay home and wrangle the little wild ones. Which is work enough most days LOL.

 We looked for cheaper credit cards, have a stack of applications here for them even. The only problem I have with these is that if you miss or are late on one payment that the rates shoot right up. Now I've never missed a payment, but sadly I have been late once or twice on a payment. Not very, but a few days. I am a disgustingly absent-minded person. My husband is even worse! We try, I set up a system where my computer flashes warnings at me in the morning and this helps (two months remembering everything - wooohooo!) but I'm terrified of being late and having those rates go up - nevermind the $40 late fees - those HURT!

 And we wouldn't be getting a HELOC, those are evil! That's like having a credit card because you can always draw it out once you pay it off. Yuck! IF we do this, it would be a regular old home equity loan/second mortgage.

Thanks so much all of you for everything you've given me to think about. Some things I wouldn't have thought up myself too! And I appreciate how welcoming everyone is! I'm glad I found this forum, I've been getting the dollarstretcher emails for years and never knew this was here.