Home Equity Loan Closing
Tomorrow we have the closing set on our Home Equity loan. This has not been an easy decision for us, but one that is necessary to stop the leakage in our monthly budget. I figure that in the near time it will even out the budget, and will allow us to build up a decent emergency fund.
Basically, we are taking all our credit card debt and our existing home equity loan(with 7 years remaining) and consolidating it into one $72,000, 15 yr loan at 6.9%. The payment will be around $635.00. Our current payment total $1440.00 monthly, so the savings will be $800.00 a month. This is $800 that we will not be adding to our credit cards each month. That savings, coupled with the extra hours my wife has been getting will allow us to break even on the budget.
I am not going to stop there though. My plan is to pay this loan off in 7 years at the most. Why seven years? Five years seems to be too aggressive, unless we are able to find some extra side income. If we stay to budget for the rest of the year and build up an emergency fund of around $5000(thanks to the tax rebate and other sources, this should be feasible), we can start putting extra $$ towards the debt. Starting next Jan, if we can come up with $450 extra per month, then we can get the whole thing paid off in another 6 years. According to the mortgage calculator at Dinkytown, we will be saving a total of $22,000 in interest if we follow this plan.
I know that we may have some bumps in the road along the way, but if we can build up enough of an emergency fund then we can at least ride them out. What do you all think? I know many don’t approve of tapping into home equity to pay off credit cards, but I believe that because of the medical issues we are dealing with, we have no other choice. Another year on the current path would lead to another $15000 or so in debt.
Filed under: Debt
