Mortgage

what do you think of increasing your mortgage to pay off debts (assuming you have sufficient equity) then starting fresh? In other words borrowing from your equity then start over debt free.

I am not a big fan of borrowing equity from your home, i.e., home equity loans, because if you don’t make the payments on a home equity loan, you can lose your home. If you don’t make your credit card payments, you will not lose your home.

Actually, I just wanted to refinance the total mortgages and start fresh. That way we can file a chapter 7, cure the arreage and not lose our home.

Still, personally, I think it is a very bad idea because…:

1. A mortgage is still a debt… you are still in debt just with a different name.
2. There are costs usually involved with (re) financing, costing you more money.
3. This is a debt that is secured by your HOME, which you could LOSE if you couldn’t pay it back in a timely manner. The one thing you should be most secure with.

You obviously want to deal with debt especially mentally, a way that makes you feel like you’re accomplishing something, so find a way that won’t be so risky. One typical way that makes us feel good and does good is by paying off the smallest debt first, then when paid, adding that entire amount to the next one, paying it off a little faster that way. Still of course, making your regular payments on all debts. If you have extra to put toward debts,, either pay off a small debt or pay it toward your highest interest producing debt.

Really it’s better to pay off the highest interest first but… sometimes the mental encouragement off seeing the small ones paid of is really more beneficial if it makes a difference in motivation. If you go the highest interest route, make sure you keep a record so that you can SEE what you are accomplishing. You could just using percent of debt paid off or pie charts or whatever will work for you.

Just my opinions, but gleaned from ‘experts’. I am a classic example of why this generally does not work. If you do not truly change your lifestyle, destroy all credit cards, lines of credit etc., have a healthy emergency fund, you will wind up right back where you are, only owing more on your house.

Very good points.

I had all my credit card paid off last August. But here I am with $12,000 in credit card debt. I’m sick to my stomach over it.

I’ve been playing with the household budget worksheet and I’m amazed to find out just how much “extra” money I have or should have each month.

I wish I had found this all out a long time ago.
I actually thought I was “budgeting” by tallying all the bills and seeing what was leftover. I always knew approximately what I had left to spend on gas, groceries, etc. But it was all lumped together and gone before I knew what I had spent on. I felt like I never had money to save and never had extra money.

Anyone read the book Debt is Slavery ? It has 5 reviews on Amazon and all are five star. I ordered a used copy for my grown son, but I plan to read it first! 🙂 It’s supposed to be an easy read with less than 100 pages, but filled with a lot of good info. I like a review that mentions the GMM, Great Marketing Machine . That’s everywhere you go… right along side Visa, or is that MC. Oh well, whatever…

Thanks for all your comments. I have been seriously saving and budgeting for about 7 months now so I think I am ready to do this. I do believe though that if you don’t change any old habits you’ll just end up in debt again. My debt happened because after the death of my son I changed my work situation and truthfully didn’t care about my money, bills or much else for a while. I feel like I am finally back on track but unfortunately have to make up for that lost time. I plan to maintain my strict plan of financial recuperation.