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Thread: what to do?

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    hi experts,i'm 57 years old this summer,our mortgage is up in june,and i want to consolidate all my other payments,we owe 123,000 on the mortgage,and would need to borrow 70,000 to consolidate all outstanding credit cards and loans and pay the loan off that in 5 years,i'm trying to figure out if i should keep my mortgage seperate and mortgsge the 123,000 dollars,and am wondering if i was to keep a 25 year term,but make say 400.00 more payment would it be better than getting say a 15 year term?i want my mortgage to be as low as possible when i'm planning on retiring around 5 years?or if anyone would advise me to do things differently,i want to be as debt free in around 5years,i know i'll still have a mortgage in 5 years but hope it will be small enough to be able to handle it,thanks
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    Luv Saving People Money MortgageQueen's Avatar
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    Well a 5 yr. fixed mortgage(amort. 15yrs) for $203,000 would cost you almost $1430/month payment. End up with $146,000 owing
    " " " (amort. 25 yrs) ' ' ' $ 991/month. End up wit $174,500 owing
    A mortgage is a lot lowerinterest rate then a standard loan, which is fine. . . .but you would not deliberately want to amortize tht $70k over 15 to 25 yrs. However, if you make double payments and payment on principal yearly, it would pay off.

    That is just some figures but you should have a broker analyze your "whole" financial situation for proper advice.

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    Financial Advisor ashedfc's Avatar
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    You have to analyze the source of your problem. What made you pile up on $70000 of credit card, loans etc. Was it an emergency, which came out of no where, or it's a behavioral problem (where you are unable to control your spending habits).
    I have the following points, which I would like you to go through either yourself (or with a financial advisor, who can prepare a budgeting schedule & make you adhere to your budget).
    1. What is the interest rate you are paying in your $70000 loans (each ones are different, credit card, prrsonal loan, car finance, etc. do a weighted cost of total interest). I mean if credit card is $20000 at 15% than take (20000 times 15%) which is $3000, & if personal loan is $30000 at 7% than take ($30000 times 7%) which is $2100. Once you reach the total figure, than divide it by 70000, as it will give the weighted cost of interest on your total $70000 borrowing.

    2. Why this additional spending of $70000 wasn't included at the source where cost of capital is cheapest/lowest. Why this attempt wasn't tried before to take loan from where interest rates are lowest (mortgage always has the lowest interest rate). Is there some credit concerns (maybe not, I'm just guessing).

    3. Is there any reason you are seeing these two debts (mortgage debt & non mortgage debt) separately. If yes, than what's the reason.

    4. After restructuring your debts, what the possibility that you won't end up in a similar situation sometime again in the near future. I mean, mostly people with spending problem reach the same situation in a couple of years. Why! Because the only restructure their debts, & they don't change themselves. They feel rejuvenated & go for shopping spree & vacations.

    5. Why the hurry to be mortgage free in 5yrs, what happens if you are totally debt free in a couple more years.

    I can add a list of such questions (which your financial advisor should ask you), before suggesting to do anything. The source of the problem needs to be repaired, so you can live comfortably in your golden years. Just treating the symptom won't help, you have to treat the cause of the symptom..
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    I agree with the above posts.You need to go and speak with an advisor to determine the best way to go about this.1. How much are your current monthly expenses, and how much are you currently paying towards your mortgage and your consumer debt?2. If you combine them all into a mortgage, how much can you comfortably afford to pay?3. What sources of income will you have during your retirement?And the key question - Where is your money currently going? If you have racked up $70,000 of debt, if you consolidate it, what's to stop you from racking up MORE debt?Also, do you have enough equity in your home to accomodate adding in an additional $70000?Consolidating by lumping your debt in with your mortgage will definitely save you money each and every month, and, for most people is the best way to go. However, we don't know your whole situation. And the fact that you want to pay off your debt in 5 years is ambitious. I'm just not sure it's very realistic.
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    Quote Originally Posted by scar View Post
    hi experts,i'm 57 years old this summer,our mortgage is up in june,and i want to consolidate all my other payments,we owe 123,000 on the mortgage,and would need to borrow 70,000 to consolidate all outstanding credit cards and loans and pay the loan off that in 5 years,i'm trying to figure out if i should keep my mortgage seperate and mortgsge the 123,000 dollars,and am wondering if i was to keep a 25 year term,but make say 400.00 more payment would it be better than getting say a 15 year term?i want my mortgage to be as low as possible when i'm planning on retiring around 5 years?or if anyone would advise me to do things differently,i want to be as debt free in around 5years,i know i'll still have a mortgage in 5 years but hope it will be small enough to be able to handle it,thanks
    thanks ,i guess what i'm trying to figure out is the best way to eliminate my debt load as i would like to retire in 5 years.i make around 87,000 last year and my wife around 40,000,we both have good to excellent credit ratings,our last mortgage ,that is to be renewed in june,was locked in at 6.5% over 25 years,we are paying 1200.00 amonth,and we got back in debt,because i thought it would be good to renovate our home,and buy the things we would need to go into retirement,such as a new 5th wheel,a truck to pull it,a quad,and snow mobiles,a boat,etc.now that we have all these toys etc.,we shouldn't have to buy anything else ,we spent alot the last few years , but that has stopped,and,trying to set us up for retiring in 5 years,so now i would like to get out of as much debt as i can ,before retiring .i have thought about consolidating all our loans and credit cards,approx. 70,000,we can afford to pay that off in 5 years,and only have our mortgage left to pay on in 5 years,which is 123,000 as of now,and try to pay as much of this off thats comfortable and not leave us money short each month,i think getting the 70,000 debt out of the way in 5 years is good for us,so hows the best way to get our mortgage down in 5 years?

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    Not knowing exactly what your finances are, all I can do is make suggestions based on what has already been written. When you retire, will you be getting a pension? If so, ask your HR department what those payments will look like when you retire. Let's say that combined for yourself and your wife it is $3000 per month, plus CPP and OAS. If you can continue paying a mortgage and paying down your debt then you will be fine. However, I have a feeling that you have over extended yourself, since you still have a mortgage when you decide to retire. Having a mortgage when you retire is not the best way to do things, it is actually insane to do so. A financial adviser will be able to give you the bigger picture, but I have a feeling that you may need to sell your home and buy a condo or something smaller so that you can retire debt free. Going into retirement with a mortgage and debt = disaster!

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    Not knowing your situation, my advice is to put the debt on the 15-year mortgage, but pay it off aggressively over the five-year term before you renew. There are mortgages out there that allow you to pay 10% to 20% of the original borrowed amount per year. On a 200 k mortgage, that's $20 k to $40 k per year at somewhere around 3% interest. If you're not aggressive you'll end up in a bigger hole because you'll simply have less equity in your home. Also, I wouldn't sell your home. It sounds like you put in a lot of work to enjoy it. Plus, moving is expensive with lawyers and realtors, etc. Condos also come with fees. If your home doesn't need a lot of work with the renos, you'll save on maintenance.

    Anyway, just my 2 cents. A lot of people don't prioritize extra payments on their mortgage because it seems like such a big loan, but it adds up. My husband are paying off our mortgage aggressively. It can be done. You have the income to make the extra payments.
    Last edited by NuCoupon; Wed, May 2nd, 2012 at 01:54 PM.

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    I pm'd you about this but I would recommend an open Line of credit at 3.5 percent. Knowing now what your income is, that would be your best choice because you can pay down chunks of it at a time. . no hassles. . .and as many times as you want. The lender I have does it for no legal fees or appraisal fees too, so just a bonus.
    This is the type of situation where a line of credit is useful. . . but many people make the mistake of using it like an ATM.

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    Not knowing your other expenses and just looking at your income, it's very possible to get rid of both your mortgage and your consolidated debt in less than five years. However, it won't be entirely comfortable. You won't go without, but you won't be able to indulge like you have been doing either.

    The key would be to get low rates of interest and speak to a financial advisor and a mortgage broker on what's manageable.

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    I would be very careful in this situation. Do you really want to turn unsecured debt (credit cards) into debt secured by your residence?

    What happens if you can't afford to make your new larger mortgage payment? You might lose your house.

    Also, you could rack up further credit card debt with uncontrolled spending. Where would you be then?

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    Quote Originally Posted by hughjarce View Post
    I would be very careful in this situation. Do you really want to turn unsecured debt (credit cards) into debt secured by your residence?

    What happens if you can't afford to make your new larger mortgage payment? You might lose your house.

    Also, you could rack up further credit card debt with uncontrolled spending. Where would you be then?
    That's an excellent point Hugh, but considering the income of Scar and DW, they can most definitely afford the bigger mortgage. What is most important in this situation is to pay it off ASAP so a mortgage for the entire amount wouldn't be terribly practical. . which is why I suggested financing it as a LOC. That's the best way to make constant payments on it. . .and save on pointless amortized interest.

    As far as running up credit again, there's only one person that can control that and that's Scar. It sounds like he's serious about getting rid of his debt and he has a good incentive (debt-free retirement)

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    The only way to get a low interest rate on a LOC is to have it secured, so there would need to be enough equity in the house to support both the $123,000 mortgage plus the $70,000 worth of toy debt and still remain under 80% of the value of the home.

    So, by the time you retire you will have all of your "toys", but they will all already be 5 years old, plus you will still have a mortgage. What happens when you need to replace your vehicles? Have you made plans for that? Do you have an extra $15,000 to $20,000 a year to throw at a line of credit right now, plus continue with your mortgage? payments? And what are you sources of income during retirement?
    I also hope you have enough insurance to cover your mortgage and your current debts.

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