I just bought a condo (20% down). Would it be wise to take out a home equity loan and payoff my credit cards?

Answer 1

Congrads on your purchase.

With the purchase of a new home/condo your cash flow will change. It is very common in most areas that mortgage payments are higher than rent. However, you receive a tax deduction for the interest paid on the home mortgage. Because of this be careful to watch and calculate your cash flow. You should obtain a W-9 IRS tax form and perform the calculations to see if it is worth while to change your tax withholding from your paychecks so that you don't have to wait until next April to get money back from your taxes.

With that said, review the interest rates on the credit cards and other debt. If your able to get a lower rate on the equity line go for it. Double check IRS rules, but I think you can deduct some or all of this interest on this consolidated debt as well on your taxes.

Paying less interest is a great thing, however make sure you can cash flow and pay the bills. By paying off all your debt and holding just the mortgage and equity line, you should be able to lower the amount paid on a monthly basis to debt, thus freeing money to save and invest.

My guess is you should get the equity line, however you must run the numbers to make sure this is the best action to take. The numbers will tell you whether it’s a good decision or not. If you don't understand how to run the numbers pay a CPA a couple hundred to run them and set up a plan for you. It is money well spent and will make you and save you tens of thousands in the future. You might even want to check in annually with a CPA to guide you on a financial plan.

Good luck and subscribe to Money magazine. You will get good ideas from it...

Answer 2

Equity is imaginary money. It creates long term debt in which banks and lenders thrive on. My advice. Pay off the credit cards some other way. When that equity builds and you sell you will be much happier. Using equity for leverage on a property that may produce income to pay that credit card bill. Well that's a whole other animal. Don't use credit cards as loans, doodads will sink you faster than the Lusitania.

Answer 3

No, no, no. I did that and lost my house. Instead, stop using the credit cards as a spending tool. Pay off the cheapest card first, by putting more money in your payment. Once the first is done, continue with the same amounts and include them to the payment of the next card.
Finally contact Dave Ramsey.com, he makes a ton of sense. Personally, I hate home equity loans, it is another way bankers get you further into debt.

Answer 4

No. I've read most of your answers, and most of those seem to be adds for money lenders. If it is at all possible, pay off your credit cards. Tighten up your spending, by not seeing something and having to have it immediately. Many people today, are being foreclosed on, because they over extended their credit, and are becoming homeless because of it.

Answer 5

sure ..that way ur credit will go up ..and u can refi again and bring down your interest rate by a lot ...what state do u live in ..im a loan agent i can help u out