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re: Is a cash-out refinance of my home a terrible idea to pay off debt?
Posted on 1/19/19 at 9:25 am to foshizzle
Posted on 1/19/19 at 9:25 am to foshizzle
quote:
When you do a refi you normally have to pay slightly more interest on the entire principal, not just the amount you're cashing out. Plus a HELOC generally costs less in fees.
For those reasons I suggest looking into a HELOC.
But to counter that, HELOC debt interest is no longer tax deductible. Depending on his tax bracket, that might be the difference. Like the above poster mentioned, start putting together a spreadsheet to calculate all of the factors.
2
Posted on 1/21/19 at 9:07 am to Volvagia
HELOCs are also running around 6-6.25%. Not a good option.
Posted on 1/21/19 at 12:55 pm to notsince98
Well If you lose your job or everything goes south, it’s nearly impossible to get out of student loan debt,but placing your money in a different loan would be smart due to tout ability to file bankruptcy for it.
Student loan debt is a form of indentured servitude vs other loans
Student loan debt is a form of indentured servitude vs other loans
Posted on 1/22/19 at 6:46 pm to Volvagia
quote:
HELOC debt interest is no longer tax deductible
Could still be a good idea. In this case he'd be converting a loan to a line of credit, which gives extra liquidity if an emergency crops up. It frees him up from needing money socked away in a savings account for "just in case".
quote:
start putting together a spreadsheet to calculate all of the factors.
That is always a good idea.
Posted on 1/22/19 at 6:50 pm to notsince98
quote:
HELOCs are also running around 6-6.25%. Not a good option.
Depending on the specifics it could be good even if this is slightly higher than the student debt interest.
Money spent on paying off student debt cannot be reclaimed if an emergency crops up. Money spent on paying off a HELOC can just be borrowed back again.
The real question is whether the higher rate on a cash-out refi on the entire balance still comes in lower. If the debt OP is trying to pay off is low enough, it might well be better to finance it on a HELOC at 6% than to finance the entire balance of the mortgage at a higher rate than before, even if that rate is considerably under 6%.
Excel wizardry with specific numbers needs to be employed to be sure.
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