Financial advice

[Nice Guy Eddie 13528]

I’m not following the math.  How do you go from having 78k in a mortgage and 57k in CC debt to only owing 81k in a refinanced mortgage?

[Born a Longhorn 13]

His house is obviously worth a lot more now than when he originally financed it. That plan captures all of the extra equity gained from appreciation. 
 

Step one is to get the house appraised to validate the 220k number. 

[Paco 1934]

This is the best option. My in-laws just did this, with even higher CC debt and less home equity than you.
220k - 78k = 142k equity (let's assume 4k in refinance costs, so 138k)
Pay off CCs and then close them, transition to debit cards and checks
138k - 57k CC debt = 81k refinanced
81k @ 3% for 10 years (they won't give you a great rate with your current score I'm guessing) = $782/month in principal/interest
81k @ 3% for 10 years and add $1000/month extra payment = pay off 71 months (6 years) early i.e. pay off your house in 4 years

WTF?

[Nice Guy Eddie 13528]

1 hour ago, Born a Longhorn said:

His house is obviously worth a lot more now than when he originally financed it. That plan captures all of the extra equity gained from appreciation. 
 

Step one is to get the house appraised to validate the 220k number. 

The OP owes 78k in a mortgage and 57k in cc debt. You say to refinance the house in order to pay off the cc debt. Don’t you have to refinance for 135k? Then the bank gives you enough cash to pay off the cc debt.  But the you said refinance for 81k and the cc debt is eliminated.

im just trying to figure out why you think refinancing erases debt. The size of home equity doesn’t matter if it 220k or 1m.

 

Edited February 26, 2020 by Nice Guy Eddie

[immamac 43174]

That's because he's just talking out his ass. Never ever under any circumstances take uncollateralized debt and make it collateralized. That's the dumbest fucking thing you could ever do. 

If you miss all your CC payments for all eternity and never miss another house payment and pay off your house guess what? Those CC companies can't take your house and you can just declare bankruptcy(if actually needed, no fraud) and poof ruined credit and shit for 7 years, but what do you give a fuck you own a house free and clear. 

Cash out refi or HELOC your debt away and guess what? Can't bankruptcy out of that and definitely gonna lose the house if you stop paying those back (job loss, other dire circumstances) 

401k is a bit iffy because of how the tax implications work and owing the IRS money could land you in Federal pound me in the ass prison. 

There are a million and a half companies who want to take your debt and consolidate it for not half bad interest rates. Look at Marcus from Goldman or SoFi or lending tree or... You get the point there's tons of people out there buying "c to b grade" debt for 6-10% interest all you can bundle. 

Paying the 3-5% balance transfer transaction fee on a 0% card for 18-24 months is the dream, but if you can't do that then paying 6-10% with 0% and 0 closing costs for a debt consolidation is the next best thing. 

[Nice Guy Eddie 13528]

I agree the best option is to just pay off the cc debt over time. Unfortunately paying off 57k with 1450/month is a long stretch even with modest interest rates.

OP - is there anything worth selling?  Paid off cars worth 20k? Replace it with a 5k car paid with cash. And if you have anything like a motorcycle, boat or vacation home, that should be sold immediately. I know there can be a perceived public shaming if people see you driving a POS car one day but so what. You’re doing what is best for you. F them.

Or sell any car in which you are making payments.

regardless don’t sweat it, and allow this to ruin your spirit or relationship. People come out of worse debt.

Edited February 26, 2020 by Nice Guy Eddie

[Redneck Mutha 8017]

Without knowing a few details (potential refi rate and closing costs, CC rate, 401k loan cost and details), it's tough to say with certainty.  What I would say is:

1) House sale would probably be my last resort - remember you have to pay realtors and closing costs (and potentially anything the buyer might want fixed), plus any new things for the home you might need (window coverings, repairs, etc.).  All those costs add up and may not net you enough to even be worth it.

2) That 3.25 rate you have on the current mortgage is relatively cheap.  I'd try to keep that locked in, if possible.   Of course, if your CC rate is 20% and you can roll it all into a cash out refi for 5% or whatever, you have to weigh jacking up the rate on the $78k balance vs bringing that $57k balance at the CC rate way down.  Take a look at the 401k loan option, if possible.  Also check costs and rates for home equity loan or line of credit.

3) As mentioned, cut those cards and build a realistic budget ASAP.  If you can make some extra dough (work OT, part-time gig, uber, mow yards, whatever) to pull in a few hundred extra a month, do it.  It will help bring in money and keep you from having free time to spend.  

4) If you have assets of value that aren't needed (boat, jewelry, travel trailer, antiques, golf clubs you haven't used in 10 years, etc.) you can liquidate, think about that.  If you have a garage sale, pm Mrs Cumsteen and you'll have your shit paid down in no time.

5) Obviously the goal is to pay down the highest rate as fast as you can.  Put pen to paper, lay out all your options including refi closing costs, rates, monthly payments, payout dates, etc.  Then sit with your wife and discuss the pros and cons of each.  I would say that whatever you decide, make sure you are both bought in and committed. 

As you go through the process of paying down that debt, keep focus, don't get discouraged, and reflect on the positives.  You have a nice chunk of home equity and a nice nest egg.  Debt free and owning your home by 60 is a great accomplishment!

[Jiggy-Z 3437]

Others have offered ways to restructure your debt and you are going to have to do something about that sooner rather than later.  But..

..others have also said you need to address the root cause of the problem which is spending more than you make.  Now if this was because of home expenses or illness or some other thing that you do not see as repeating systemic problem then you are on your way once you do the restructure and payoff.  But if not, I would take a look at Mr Money Mustache , a website dedicated to eliminating necessary expenses and changing the way you think about what is and is not really necessary.  The site can come off as pretty radical, ridiculously frugal, and tone deaf, but if you do only half of what they recommend, you will get that spending under control and probably change the way you think about money and life in general.  Much like losing weight, spending on needs rather than wants takes a shift in thinking and a permanent lifestyle adjustment.  Hate to go all Susan Orman on you but that is the issue I see.  Good luck, or as longtime AM radio host and money guy Bruce Williams would say, "I wish you well my friend".

[Dahobbs 17691]

4 hours ago, immamac said:

That's because he's just talking out his ass. Never ever under any circumstances take uncollateralized debt and make it collateralized. That's the dumbest fucking thing you could ever do. 

I don't agree with this, at least not on such absolute terms. You are correct that you lose most of the advantages of bankruptcy and homestead exemptions if you collateralize your debt.  That said, I don't think planning for the absolute worst case scenario (non-payment) is ideal financial planning advice. I think the better approach is to look at how likely going into default on the debt really is. If it isn't likely at all, reducing interest rates (and as a result, total cost to you) by collateralizing the debt is a great option. But, if there is a decent chance of default, sacrificing the protections offered by bankruptcy may be unwise. 

[Nice Guy Eddie 13528]

On the topic of Mr. Money Mustache, I would suggest easing into financial minimalism. For example, if you're eating out 5x per week, perhaps cut it back to 2x instead of 0. You run the risk of rebounding back to bad habits if you cold turkey everything in your life. You still have to live and enjoy life to some extent. Or let Starbucks become the monthly treat instead of the stop during the daily commute. Or instead of cancelling Spotify, SiriusXM, Pandora and Apple Music, keep 1 of them.

You and your wife need to be on the exact same page if you start cutting back. Any spouse will get fed up if they disagree about any spending changes. I don't mean nodding her head that she knows that spending needs to go down. Couples have to be 100% locked in with the plan.

[txhorns 2413]

Honestly in order to get some actual good advice we do really need to know from op if this was a 1 time emergency type situation that racked up the debt or if it's just bad spending habits and living above your means.

[kmac30 416]

Only input I have is that you cannot get a loan on your 401k for $57k. Limits are a) the greater of 10k or 50% of your vested balance or b) $50,000 - whichever is lesser. So you could potentially get $50k from your plan and you would have to come up with the other 7.

 

You’re also replacing pre-tax money with after -tax money. If you’re in the 24% bracket, it takes $1.32 to replace each dollar withdrawn from the plan.

 

Good luck.

 

[Redneck Mutha 8017]

1 hour ago, kmac30 said:

Only input I have is that you cannot get a loan on your 401k for $57k. Limits are a) the greater of 10k or 50% of your vested balance or b) $50,000 - whichever is lesser. So you could potentially get $50k from your plan and you would have to come up with the other 7.

True, and longest payback period is 5 years.

Quote

You’re also replacing pre-tax money with after -tax money. If you’re in the 24% bracket, it takes $1.32 to replace each dollar withdrawn from the plan.

You'd be paying any lender back with after-tax money, so don't think you're really losing anything there?  

Probably the best part of this type of loan is that the interest is paid to yourself (may have been mentioned upthread?).

[Jkwellborn 6748]

Sounds like it’s past time to start sucking dick for drugs.

[Nonbryan 173]

Take a Dave Ramsey Financial Peace University Class and if you follow the plan, you will dig your way out of this mess.

[Aldo Raine 122]

Take a Dave Ramsey Financial Peace University Class and if you follow the plan, you will dig your way out of this mess.

Wife and I did this, we were both all in and it changed our lives. We cut up the credit cards, paid her $58k in student loans, built up a nice rainy day fund and now fights over finances aren’t a daily occurrence like they used to be.

Whatever you decide to do, make sure your spouse is 100% in agreement and participating/in the loop as to where’s the money is going.

[Nice Guy Eddie 13528]

I don’t fully agree with Dave Ramsey on all of his steps but i know people get good results following his plan.

for average people, there isn’t a quick path to get out of debt or get wealthy. It’s about following a plan and living well beneath your means. And then let the clock run for a few years.

Ramsey has a radio show in most markets and on siriusxm and many videos on YouTube if anyone wants to casually check him out.

[Nonbryan 173]

1 hour ago, Aldo Raine said:

 

Wife and I did this, we were both all in and it changed our lives. We cut up the credit cards, paid her $58k in student loans, built up a nice rainy day fund and now fights over finances aren’t a daily occurrence like they used to be.

Whatever you decide to do, make sure your spouse is 100% in agreement and participating/in the loop as to where’s the money is going.

 

Aldo, I like the way you put that. It changed our lives as well.  We had a VERY similar experience!  

[Brew 3049]

On 2/26/2020 at 7:08 AM, immamac said:

That's because he's just talking out his ass. Never ever under any circumstances take uncollateralized debt and make it collateralized. That's the dumbest fucking thing you could ever do. 

If you miss all your CC payments for all eternity and never miss another house payment and pay off your house guess what? Those CC companies can't take your house and you can just declare bankruptcy(if actually needed, no fraud) and poof ruined credit and shit for 7 years, but what do you give a fuck you own a house free and clear. 

Cash out refi or HELOC your debt away and guess what? Can't bankruptcy out of that and definitely gonna lose the house if you stop paying those back (job loss, other dire circumstances) 

401k is a bit iffy because of how the tax implications work and owing the IRS money could land you in Federal pound me in the ass prison. 

There are a million and a half companies who want to take your debt and consolidate it for not half bad interest rates. Look at Marcus from Goldman or SoFi or lending tree or... You get the point there's tons of people out there buying "c to b grade" debt for 6-10% interest all you can bundle. 

Paying the 3-5% balance transfer transaction fee on a 0% card for 18-24 months is the dream, but if you can't do that then paying 6-10% with 0% and 0 closing costs for a debt consolidation is the next best thing. 

Unless there is some thought to keeping open the possibility of filing bankruptcy, I’m going straight to the bank and getting a 2nd mortgage at 5% and being done with it. At $57k and $1400 a month, he’s going to be chasing his tail for years with the balance transfer option. I’m also not getting in bed with the secondary market either. No way in hell am I taking a 401k loan at 52 with that much equity either again unless I want the option of defaulting and recognizing the income. Retirement isn’t that far down the road and it’s 15%+ of his balance.

[Sandman 3415]

On 2/24/2020 at 5:24 PM, Pokoloco said:

nice(for South OKC) $220,000 house 

Ain't no houses on the south side for $220k. You live in Moore, buddy. Own that shit! 

JK, I hope you get this shit worked out. Best of luck.

[Jiggy-Z 3437]

20 hours ago, Nice Guy Eddie said:

On the topic of Mr. Money Mustache, I would suggest easing into financial minimalism. For example, if you're eating out 5x per week, perhaps cut it back to 2x instead of 0. You run the risk of rebounding back to bad habits if you cold turkey everything in your life. You still have to live and enjoy life to some extent. Or let Starbucks become the monthly treat instead of the stop during the daily commute. Or instead of cancelling Spotify, SiriusXM, Pandora and Apple Music, keep 1 of them.

You and your wife need to be on the exact same page if you start cutting back. Any spouse will get fed up if they disagree about any spending changes. I don't mean nodding her head that she knows that spending needs to go down. Couples have to be 100% locked in with the plan.

This. In my post I was not suggesting any kind of financial minimalism at all.  People who find themselves in these kinds of financial situations can often just take a step back, take a deep breath and really look at what they are buying and go "holy shit there is a lot of waste and stupid bullshit".  Kind of like someone who is overweight, who just takes a look at their diet and realizes they are pounding 64 oz of soda per day, eating fast food 10 times per week and consuming 25 craft beers over the weekend....if they just stop and say wtf am I doing and make a few little changes, they can get off of the ledge pretty quickly by getting at that low hanging fruit.

[NeverMarryAStripper 21943]

Your math is fucked up.   Current mortgage is $78k add $57 in CC debt and he is refinancing $135K.  It would be really amazing if he could roll $57k of CC debt into a $78K mortgage and end up with $81K in debt.

Edited February 27, 2020 by NeverMarryAStripper

[Pokoloco 1282]

41 minutes ago, Sandman said:

Ain't no houses on the south side for $220k. You live in Moore, buddy. Own that shit! 

JK, I hope you get this shit worked out. Best of luck.

Moore, Moore, the town with all the whores M-O-O-R-E!