Money going down the sewer

[crazy2crazed]

We are having plumbing issues with our home. Of course, there are other things that need a touch-up. But the year-long plumbing issue has got to go once and for all with a new installation so it been told by contractors.  Constantly flushing and snaking is sending the water bill through the roof.

 

Trying to figure out what is best – sigh. So I’m looking for thoughts.

 

So we have been exploring financial options.

 

1)      We have cash-out refinance option. However, home is really dropping now and we are down to 60,000 with a 4% interest rate. Even paying a bit extra each month. So really looking forward to paying off home since it cost us the most monthly.

2)      We have a couple of credit cards that could cover repairs. However, cc tends to get out of hand once close to spending limit or maxed. So really don’t want to go that route either.

3)      Then I hear about getting a second mortgage. A line of credit or loan. Still messing with home though.

4)      Then you have a personal loan.  Maybe getting the maximum amount and taking care of the problem and maybe combine any additional debt with what is left.

 

We have no cash reserves right now because every bit was used while separated for half a year to care for myself and kids and get out of debt in case things ended in divorce.

 

Option four is at top of our list although it means an additional bill that may slow down getting out of debt. Refinancing means starting over and potentially not getting the same great rate. Daughter also getting ready for college and will need a ride. So want to be able to co-sign if needed. She is working.

Another option. Hubby could continue to crawl under the house until tax time next year but I fear the repair cost would double for that simple fact.

Home equity loan or line – never done and so unsure since it involves our one and only home.

 

Ideas anyone? I hope posting was in correct place.

[cv91915]

How much money do you need for the permanent fix?  How are your credit scores/could you qualify for a new 0% or low APR balance transfer card? 

 

(this would be my first choice)

 

What is your current LTV (mortgage balance divided by current value)? 

 

If you multiply the current value of your home by 0.8 and subtract your current mortgage balance, that's a ballpark estimate of how much equity you could take out.  

 

HELOCs don't cost much, if anything, to originate (I'm closing on one with Chase next week for $50 OOP).  The rate will be higher than your first mortgage but lower than a standard credit card purchase that you would revolve for several months.

 

(HELOC would likely be my second choice depending on the details)

 

A cash-out refi is going to cost you at least a couple of thousand in origination costs (you will see "no cost" options, but those come with a higher rate -- so you'll pay either way).  How many years do you have left on your current mortgage?

 

(cash-out refi would be my last choice of the three options due to the upfront costs, potentially higher interest rate than your current mortgage, and potentially stretching out your entire current mortgage balance over a longer term)

[crazy2crazed]

Just under $5000 would take care of repair need. At least that was the quote a few months ago.  I don’t know the last time we checked scores because we have not really been in the market for anything and just wanted to get out of debt.

 

However, back in 2006, when we did a cash-out refinance to remodel home I believe we were around 680. Discover FICO says 698 but that is probably fake.

 

I think scores are still low because last year I applied for a discover card and capital one card. Capital one gave a $2500 credit limit with 25.74% rate. Discover gave $5100 limit with 0% intro then after Dec. 2018 it goes to 26.75%.

 

Using your formula on the equity – we would have more than enough.

 

When we did previous refinance we took out a 30-year mortgage. We still have twenty to go. However, it has turned over. For example, at first we were paying (not the exact figure) $540 a month than last year I believe it was, it started saying we only owned $500 a month but we still pay the same $540.

 

Personal loan (unsecured) seem to carry rates like credit cards. Secured loans seem to cost less but will have to use collateral like a vehicle, lawn mower, etc. We only have two vehicles and the main one I use to travel the highway for work.

 

So do you think we should look for some cards that do soft pulls and see if we qualify for any 0% APR cards?

 

Is it best to use something like lowermybills to see who may have best heloc?

 

And thank you for responding. 

Edited September 25, 2018 by crazy2crazed

[centex]

You will need a longer term 0% offer if you are only qualifying for cards with crappy rates.  In the interim, FIX the issues on the report that are contributing to the banks only offering crappy terms. 

 

What is the specific issue on the plumbing?  Snaking is something that suggests problems OUTSIDE of the house since issues inside the house are usually a one and done unless you have kids flushing stuff that shouldn't be flushed. 

 

For the small amount at issue, it may be more worthwhile to go to your small local lender and get a personal loan.  Those should be single-digit rates.  At $5K, you should not need to go longer than twelve months in duration...

[crazy2crazed]

Soft pulls on credit cards still show crappy rates. Personal loans (unsecured) also offering crappy rates. One lender said transunion credit score was 702 for me and hubby 671. They offered a 19% interest rate.

 

The specific issue on the plumbing is outside of the home and directly underneath. Contractors suggest collapsed main sewer line since we constantly have to re-open using the same methods.

 

I figured as much on personal loan because the smallest amount for heloc at our local bank is 10000. We don’t need that much except if we use whatever balance to pay off last credit cards.

 

Thanks for suggestions. And yes, it is time to attend to credit a bit more.

[Glacier]

A typical HELOC does not require you to use the entire amount.  It is a line of credit, where you can apply for the $10K and use the $5K to fix your issue. Then you only pay interest on the $5k balance.  Similar to credit cards. 

[centex]

2 hours ago, crazy2crazed said:

Soft pulls on credit cards still show crappy rates. Personal loans (unsecured) also offering crappy rates. One lender said transunion credit score was 702 for me and hubby 671. They offered a 19% interest rate.

 

By "one lender" do you mean your SMALL, LOCAL BANK/CU or do you mean some online lender? 

 

Yes, it DOES make a difference. 

 

This is why one should ALWAYS be cultivating relationships with local lenders.

[crazy2crazed]

The 19% was online lender (Discover). However, we did apply for Regions personal line of credit (the one where you do not use your home as collateral) and waiting to hear back. Will apply tomorrow with our credit union. I may check back on the Heloc now that I'm getting a better understanding.

 

Edited to add: Our local credit union only offer personal and car loans. 

 

I did a few soft pulls on major credit cards.

 

I have not accepted any offers but have 15 days to accept the one offered by Discover.

Edited September 25, 2018 by crazy2crazed

[centex]

Online apps are rarely your friend for personal loans, especially with blemished credit.  You want someone where you are literally sitting across the desk from them as they contemplate character, capacity and collateral...that alone can be good for a few percentage points.  In the meantime, you are killing yourself with the inquiries.

[Konrad2012]

HELOC. 

 

Low APR, and since you're using the funds for home improvement the interest is legitimately tax deductible. 

[cv91915]

12 hours ago, Konrad2012 said:

HELOC. 

 

Low APR, and since you're using the funds for home improvement the interest is legitimately tax deductible. 

There is no potential tax benefit to paying mortgage interest unless itemized expenses exceed the standard deduction, which recently went WAY up.  

 

If I add some reasonable assumptions to OP's < $600 mortgage payment I wouldn't expect tax benefits to be a factor for OP.

 

Plus OP only needs $5,000.  I wouldn't put another lien on my house for $5,000 unless I was nearly out of options.

[cv91915]

Based on the relatively small amount of money needed I would take the cash-out refi off the table. 

 

Paying ~$2,500 in origination fees (or taking a higher rate for a lower fee option) to get $5,000 out makes zero sense.  There are other drawbacks, but they hardly matter given this fact.

 

With scores consistently around 700 I would recommend trying to get a BT card (or two if necessary), provided the contractor will take credit cards OR the new BT card lets you tap the funds with convenience checks. 

 

If you cannot repay the entire balance(s) before the into 0% period ends, open another card and do another BT.

 

Don't worry about the inquiries; this is why they were invented.

 

Also, OP, as you are surely aware you urgently need an emergency savings fund.  A few months ago we spent around $12,000 replacing a water heater and the whole HVAC system, which failed within two weeks of each other.  Owning a home is the gift that keeps on taking.

Edited September 26, 2018 by cv91915

[crazy2crazed]

I hope to have not caused additional damage to credit reports with the inquiries. The credit card offers were said to be soft inquiries and I thought those did not count against you. Discover and Regions probably would be hard, but I was trying to get the lowest APR so we could continue to pay off debt.

 

You are spot on cv91915 with us using the standard deduction. Gave up on itemizing a long time ago.

Not considering the cash-out at all. Look like we are down to personal loan and lines of credit. That is where I thought we needed to shop and take the best offer.

 

Regions offer two lines of credit without collateral. The only thing I see so far is both have annual fees. One is 50 a year and the other is 25. I don’t know what the APR is just yet. Will try to check on that application today.

 

I understand the whole emergency savings. What was left (just under $1000) just paid for brand new shoes and rotors all the way around after brake caliper failed and a thermostat housing that decided to go out just as I was making it back into town from work.

 

Life is great!

[cv91915]

 

Inquiries generally matter somewhere between little and nil, so please don’t use an irrational fear of inquiries as a significant factor in making a smart financial decision... that was really my point.  

 

Focus on finding the most cost-effective way to make this purchase.  A couple of inquiries to get you to the optimal financial product is the definition of using the right tool for the job.

 

[crazy2crazed]

One final question, please help.

 

We kept the inquiries low. We did I believe three soft inquires for credit cards and all rates were over 24% - so we did no hard pulls. We applied at Discover with hard pull after soft pull and got approved for $2500 – have until October 10 to accept offer.  Finally we applied at our bank for an unsecured bank line of credit. It was approved for $5000 and 10.99% (variable rate).  We accepted that offer to build on face to face relationship. We could have done fixed but loan amount would have been much smaller.

 

Now we wonder if we should also accept the discover offer to keep from having an unused hard pull. With the offer we could combine our last three credit cards (they are closed so we can’t reuse) or hold the funds from loan and use it to pay the loan back.

 

These are the three cards that are closed as they were part of debt management at one time. Maybe this is the issue on credit report because we don’t have a bankruptcy. Although it is time to check and see what is going on.

 

Card one: $1014 @ 1.90% rate

Card two: $797 @ 1.90% rate

Card three: $1100 @ 2.5% rate

 

The rates for discover loan was 19.99% for 48 months $76, 18.99% @ 36 month for $91, and 20.99% @ 60 month for @67. Now I realize those terms would cost much in finance charges if we go the length of time given but if we pay more could that work to work on credit.

 

???? More thoughts or should I move to credit boards now that you all have helped thus far.

[cv91915]

20 hours ago, crazy2crazed said:

 

We kept the inquiries low. We did I believe three soft inquires for credit cards and all rates were over 24% - so we did no hard pulls. We applied at Discover with hard pull after soft pull and got approved for $2500 – have until October 10 to accept offer.  Finally we applied at our bank for an unsecured bank line of credit. It was approved for $5000 and 10.99% (variable rate).  We accepted that offer to build on face to face relationship. We could have done fixed but loan amount would have been much smaller.

 

Now we wonder if we should also accept the discover offer to keep from having an unused hard pull. With the offer we could combine our last three credit cards (they are closed so we can’t reuse) or hold the funds from loan and use it to pay the loan back.

 

These are the three cards that are closed as they were part of debt management at one time. Maybe this is the issue on credit report because we don’t have a bankruptcy. Although it is time to check and see what is going on.

 

Card one: $1014 @ 1.90% rate

Card two: $797 @ 1.90% rate

Card three: $1100 @ 2.5% rate

 

The rates for discover loan was 19.99% for 48 months $76, 18.99% @ 36 month for $91, and 20.99% @ 60 month for @67. Now I realize those terms would cost much in finance charges if we go the length of time given but if we pay more could that work to work on credit.

 

???? More thoughts or should I move to credit boards now that you all have helped thus far.

I'm glad you found a solution to your problem. 

 

A credit line/credit product is either worth having or it's not, regardless of the type of inquiry required to obtain it.

 

A soft inquiry doesn't make a worthless product worthy, and a hard inquiry doesn't make the right credit product undesirable. 

 

You're much too focused on this.

[BravoSierra]

Good idea to check your reports for negatives. Those closed cards reporting balances factor into your utilization but at least they are at a low interest rate.

The bank line of credit is a better rate than the discover loan, so I would prefer to use that and skip discover. Don’t worry about the wasted inquiry.

A big +1 to rebuilding that emergency fund.

[crazy2crazed]

Thank you all so very, very much! You all are financial life-savers!!!

 

We appreciate you all.

 

Hugs and more hugs.