Thursday, April 14, 2005

We met with our friends at Alternative Mortgage Solutions (highly recommended) yesterday to see about refinancing our house. Gathering up all the pay stubs, tax returns, and such brought back all the horrible, heart-palpitating anxiety of two years ago when we were buying our first house and trying to keep the deal from falling through two days before closing due to sudden, complicated financial circumstances.

The preliminary stuff went smoothly, and we brought up the idea of paying off a few bills with the equity in our house, depending on what it might reappraise for. The loan we were investigating would let us borrow up to something like 85% of the equity in the house.

(Just so you know, when I say things like "reappraise" and "equity," I'm totally talking out of my ass.)

I thought to myself, wouldn't it be cool if our house had shot up in value so much that the equity would entirely wipe out our credit card debt? So I started adding up in my head how much the house would need to appraise for.

Turns out, we would need to live in the only eight-story, fourteen-bedroom Victorian mansion on our modest block of suburban split-levels.

Coming back down to reality, I pointed out a few of the nastiest creditors of whom we would definitely like to be rid, and that seemed feasible.

("Feasible" is a word I use only when speaking of financial matters, and I'm not sure why.)

But I'm not even convinced any of this is really going on right now because two days ago I cracked my head on the corner of an open cabinet door. For all I know, I'm lying on the kitchen floor bleeding out of my skull, and all recent events have been a very vivid, mildly unsettling coma dream. And you were there! And you. And you. And Uncle Fred. And little Toto…


landismom said...

Just my .02--I would be careful about trading unsecured debt (aka credit card debt) for secured debt (aka your mortgage). I went to a consumer law training a few months ago, and this was one of the things the trainers were warning against. Basically, your credit card debt is not secured by property--the credit card company gave you that loan to collect interest, but they have no ability to seize your house or other real property if you lose the ability to pay for it. Sure they can mess up your credit rating, but they can't take anything away from you.

If you roll over credit card debt into a home equity loan or refi, then you are turning that debt over to a company that can take something--namely your house--away from you, if you lose the ability to pay for it.

Again, just my .02.

Rebecca said...

Well, I hope you're not lying on the kitchen floor with a head injury, and also hope that you're refi goes as planned! We're hoping to do the same sometime soon.