Ours Recently Died?

Q: Just a general question here. I have 2 mortgages currently. Is it possible to refinance or take out another home equity loan to pay off existing mortages, credit card and use cash for a new car purchase as ours recently died? And if so what are my options. I'm confused with the options I have found (LTV, line of credit, etc.) My goal is to lump everything into one mortgage payment. Is that possible?

A: In the credit arena, just about anything is possible. The big question is why you like to make payments so much. The goal should be to get out of debt and avoid having payments, not getting any more. You can get a new 1st mortgage to replace your existing 1st and 2nd. All that would really do is combine two loans into one, and you make one payment a month instead of two. That might be convenient, but it will cost you several thousand dollars in closing costs. That is probably not a smart move. You can also do this mortgage combination and pull extra money out of your house. The first issue is that a cash-out refi has closing costs, and you will end up with a higher interest rate. The 2nd issue is that by putting credit cards and cars into a house, you are putting up your house as collateral for these consumer items. You are also streaching out the

payments for these toys over 30 years. None of that is a good idea. You can also do any combination...you can replace the 2nd with a bigger 2nd, add a 3rd mortgage or home equity loan, or get a home equity and replace both your 1st and 2nd. The better advice is to buy a cheap car that you can pay cash for. Something in the $3800 to $4200 range would do just fine. Then work to pay off your consumer debt. After that, save up for a better car. If you talk to people who retire with large 401K's and IRA accounts, most of them will agree that they turned the corner financially when they got off the car payment merry-go-round. Payments will keep you broke.