Equity Loan Information - consolidating loans credit cards/refinancing home?

consolidating loans credit cards/refinancing home?

I found out a couple of weeks ago that we had two mortgages on my house, something called 80/20. We were having a hard time paying some credit cards so i'm thinking of consolidating them and refinancing my home through wells fargo, I understand about refinancing but their telling us the equity on the home will help pay those credit cards. Can anyone give me more information about this, is this a right way to go? or is their a catch to it?

Public Comments

there is a catch
I suggest calling Dave Ramsey he has a radio talk show on every afternoon and a website that you can go to and email him a question. He really is very helpful. Dave says eat beans and rice and stay at home and use the extra money to pay on credit cards until you can pay them off. Have a garage sale and apply the money to the debts. I do not know what he would say about the mortgages. Good luck!
If you get any kind of loan, make sure it is FIXED interest and not variable. Otherwise, the interest will skyrocket before long and you won't be able to afford the payments and can lose your home. A better choice than putting up your home as collateral is to get a consolidation loan or signature loan and pay off your cards. Try to NEVER put liens on your house!! IF you can keep up the current card payments, pay the lowest balance off first, then add that monthly payment to the next lowest balance and pay off card #2. Then combine payments from card #1 and #2 and add them to monthly payments for card #3. STOP USING THE CARDS or you'll never get out of debt. Cut them all up except one for emergencies and go lock that somewhere very inconvenient and distant from you so it's not a temptation.
An 80/20 is where the mortgage company sells you two different mortgages because you were unable to make a 20% down payment. Majority of companies does this. Plus you will pay a PMI (Private Mortgage Insurance) that protects the lender in case you default on the loan. The "80" represents 80% of the value of your home. The "20" represents 20%. Usually 20% part has a higher interest rate than your 80% loan. If you want to refinance, you should really check out Primerica Financial Services first. There is no application fee or any upfront fees to analyze your debt information and see what you qualify for. Plus, there's no obligations for you go to ahead with the loan. I don't know why Wells Fargo would tell you to use the equity to pay off the credit cards. It makes no sense since that will depreciate the value of your home and you will still have two loans (the refinancing loan and the equity loan). Actually I do know why they want you to do it that way. Its because they can earn higher commissions and profits by selling you two loans. Here is the difference between what Primerica do for clients vs what majority of other financial companies do (such as Wells Fargo). 1) Primerica charges no upfront fees such as closing and appraisal fees. Other companies requires that you do. 2) After refinancing, your total monthly payment may decrease. Let's say you save $200/month at either company. Wells Fargo will ignore on what you should do with that money. So you will most likely to spend it. Primerica teaches you what you should do. You should apply some of it back to the principal to lower the amount you owe and invest the rest and they going to show you how much you should put into each part. 3) Primerica uses simple-interest calculations (similar to student loan calculation) on their refinancing loan, while others uses schedule-interest. 4) Primerica focuses on building equity by showing you how to pay the loan off faster. Other companies focus on keeping you in debt as long as possible. 5) Primerica has free bi-weekly payment option and if you choose this plan, your interest rate is reduced by .25%. Other companies charges a fee for this plan. If you don't like what Primerica has to offer, then you don't have to do it. But you should check it out first since its free.
There are many debt settlement agencies that come from the heart of credit card issuing companies or financial institutions. These agencies where created so as to let credit card companies to recover their money and thus, even if they'll provide you with solutions to eliminate your credit card debt, that solutions may not be in your best interest. Many of these companies would suggest you to take a refinance home loan and use your home equity to repay your credit card debt. That may seem a good solution and in some cases, it can be. However, it shouldn't be your preference, and most certainly, a debt settlement agency committed to solving your debt problems shouldn't suggest it as your first choice. Read more about it at: http://www.credit-card-gallery.com/article/149,Credit_Card_Debt_Settlement_Avoid_Refinancing!
Please don't go through Wells Fargo unless you really have good credit, and if you have a good lawyer. Wells Fargo will prey on people in the situation that you are in just to have an excuse to raise the interest rate and then after doing so tell you that if you make 12 to 24 months of payments, they can then refinance the loan (or mortgage) for a lower rate with either their company or another. However, when you do that, your house or other property has depricated versus the loan balance tremendously, decreasing your equity sharply or making the equity that you had non-existant. Wells Fargo makes their money on sub-prime consumers and those consumers that have a lot of debt and are looking for a way to reduce their overall debt. If Wells Fargo has promise you that they can use the equity in your home to pay off the credit cards that you have, do the research and ask them questions about it; especially what rates that you qualify for, and if, between acceptance and final closing, if the rate, payment, and points will change. Wells Fargo loves to include hidden fees and charges that will increase your payment by $20-$100 before you even close. If this happens, do not sign the contract. Also, one other thing, (from personal experience) if you are one day late, due any circumstances, you will get harasses by Wells Fargo representatives from their corporate office and not the branch office that you signed the loan at, and these representatives do not respect the laws set by FCRA for the tactics and times that they can use to call.