Re-Fi v/s Home Equity Credit Line Question

How much cash out do they need? Why refi if you can get a heloc or loan?

I would hate to take on a 30 yr mortgage at 74, but I do not know all the details

They could get a heloc for a few hundred bucks and pull out $ pretty easily.

They may want to consider reverse mortgage

I would NEVER I repeat NEVER take an asset like your home to pay off unsecured debt like a credit card.

What are the interest rates on the Credit cards? IF their credit is good they can find cards with low interest rates.

What kind of minor repairs?

Why not look at a debt consolidation loan through the local CU? If you're determined to use their home to help them turn short-term revolving debt into long-term debt then I'd make an honest, blunt assessment here.

These folks are not good at handling their money and/or their finances. The situation they're in is proof positive of that. Their home however is a fantastic asset that they have plenty of equity in. It could help them out of their current situation, save them money, and still be something they can hand down to their children or whomever they wish to provide somewhat of a legacy down once they pass.

I would protect their ability to do that at all costs. Which is why I suggest against using their home. But if they're bound and determined to do so:

Go with a HELOC. Do not refinance using the current mortgage.

Why?

Simply put, the HELOC will be in the second lien position for the property when it comes to the title. Which means that if your parents get into financial trouble again-and trust me, having done enough of these, I know two things: That you'll tell me they will NEVER do this again, and that sure as sh!t they absolutely will do this again-the HELOC not being paid will more than likely result in a situation where if they default, said default is much less likely to result in them losing their home.

The 2nd lien position being so small is typically why a HELOC seems less attractive from a rate/term/payment standpoint when compared to refinancing the 1st mortgage. The problem is that if you default on the 1st mortgage, they're coming to get your parent's home.

Whereas if they default on the 2nd mortgage, they're going to file a judgement and if they ever sell it, they'll have to pay it off (and if they leave it to you, you'll have to do that as well), but they'll be able to remain in the home provided they continue to pay the note on the 1st.

Just my $0.02...

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hawkeye007

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reverse mortgage... that way they don't pay a mortgage note until the day they die. this will allow them to pull the cash out they need to payoff the credit card debt and pull the rest of the equity out of the house and help increase the ease of retirement. why pay on the house just to leave it to you? no in all seriousness they need to reverse mortgage this house.

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You'll totally hamstring any future capability to utilize the house to exit from additional economic hardships by doing this.

Disastrously bad advice for a fixed income couple who have already shown to be poor managers of their finances. You know as well as I do that folks who are retirement age rarely-if ever-turn around bad financial habits and become effective managers of their money once they've reached that point in their lives.

If nothing else, a HELOC-or even a total refi-at least affords them the ability to cash out and exit with a large sum of money to pay for potential long-term care, healthcare costs, or helping their children if they are forced to move in or support them in some way.

Seriously...I'm shocked you are suggesting this.

While it is true that default on the second does not automatically mean they will foreclose, a bank will still have the option to buy out the first and foreclose. I worked for a bank in Louisiana that did Intel the time

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hawkeye007

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Gfunk I have great respect for you on this board, but why not reverse it. of course they haven't managed their money properly and that's why I suggest that they reverse it and free themselves of the debt. I understand the future economic hardships might hurt them but we cant predict those. the fixed income will be a lot better to budget without a house note or cc bills.

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I can sure as hell predict them, and it doesn't take Carnac to do so when looking at the previous history. A reverse mortgage robs the homeowner of any ability to utilize the asset down the road. It also robs them of any legacy by leaving it to family once they pass.

Again, I'm not trying to be rude, but your response is shocking. Retired folks who are on fixed income saw the flashing lights and stop signs and barreled through them. They ignored them. If you think they'll suddenly stop, all I can say is that I remain shocked, and that we agree to disagree.

There are a litany of options available to them prior to doing something radical like a reverse mortgage. Again, the HELOC is the safest. Cash out refi is the next best thing. Selling is a nuclear option to be explored only after moving them out and renting the property has been proven not doable.

I cannot disagree with a reverse mortgage strongly enough for what it does to them financially. These are people that need every dime they can get. They also need flexibility. Reverse mortgage removes almost all of it.

Just my opinion, but again...shocking advice. Said with all due respect. But I stand by it.