Is a new mortgage the best way to get rid of credit card debt?

Bankrate.com’s Steve Bucci is its Debt Adviser. He answers a question from someone with an $80,000 credit card bill.

Dear Debt Adviser, I am considering refinancing my mortgage. My plan is to take cash out in order to pay off my credit card debt. I owe $80,000 on credit cards, which is actually more than the $63,000 I owe on the house. Would this be a well-advised move, in your opinion? I can very easily handle the new monthly payment. With the savings from not making credit card payments I can make additional payments on the mortgage principal. My current mortgage has 11 years remaining, and the new mortgage would be for 15 years. So in other words, I'd be paying my house off in about the same time frame, anyway. I appreciate your advice. -- Robert

 Before he answers, Mr. Bucci has to pick himself up from the floor. Here are the highlights from his response.

Dear Robert, Before I answer your question, I must make a comment: $80,000 on your credit cards?! Because I am the Debt Adviser, I can't help but address your $80,000 in credit card debt first. That is a huge amount of debt. Before you do anything, I want you to seriously analyze how you acquired so much debt. Before doing anything, you must be very sure that you can live day to day without racking up another $80,000 in new debt after any refinancing.

First, remember that the refinancing will not really pay off anything. It will just move your debt around. Furthermore, it could end up hurting you ultimately. That's because your $80,000 in credit card bills will be converted from an unsecured debt to a mortgage secured by your home.

The real message here is that Robert could lose his home over a debt that could be cleared in bankruptcy if everything hit the fan.

But there are refinancing options. Let's say you decide to do a traditional 15-year fixed-rate refinance of your existing mortgage with a cash-out option to pay off the $80,000 credit card debt. If so, I would encourage you to organize your budget so you can repay the loan in five to seven years. As an alternative, depending on the current rate of interest on your existing mortgage loan, you might consider using a home equity line of credit, or HELOC, instead of obtaining a new, larger first mortgage. The HELOC interest rate would likely be lower. You should be able to pay off the debt in a shorter period of time. That would save you on interest payments. It will also reduce the time period where you'll be most at risk to financial surprises like illness or a layoff. My experience is that as soon as you make yourself vulnerable to a problem, it shows up.

A traditional refinance may be the best option if your goals are to: first, get a lower rate on your primary mortgage, and second, pay off the credit cards. However, if you already have a fairly low interest rate on your mortgage, a HELOC might be the better option. I want you to lose your debt, not your home. So here's an added note of caution: You are taking on added risk with either a HELOC or a mortgage. You are moving a rather large debt from unsecured terms -- credit card accounts -- to a secured loan using your home as collateral. If for any reason you default on your new loan, your home is at jeopardy. I've seen enough unexpected things happen to otherwise smart people because they took on a risk they didn't understand.

There is also a tax risk. If the unthinkable should happen and you go into foreclosure, the $80,000 used to pay off your credit cards would not qualify for debt forgiveness under the Mortgage Forgiveness Debt Relief Act. The result: You would owe income taxes on the $80,000 when you can least afford it.

Read the full article. And to ask your question of the Debt Adviser go to Bankrate.com.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Title Inc.

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 201-656-4506

E-mail vti@vested.com - www.vested.com

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Turned down for a mortgage? Maybe here’s why

The New York Times’ Vickie Elmer addresses reasons for mortgage loan application rejection.

“WE regret to inform you...” Nobody applying for a new mortgage or a refinancing wants to see or hear these words. But last year more than two million people were turned down for home loans, according to federal data, often because they didn’t meet certain lender requirements or because their applications were incomplete or otherwise problematic. Lenders’ underwriting criteria have become more rigorous in recent years; some banks have tightened up beyond federal requirements.

Here are the six biggest triggers for rejection, according to industry experts.

• INSUFFICIENT INCOME Lenders want to make sure you can afford to make the mortgage payments. Someone who earns, say, $40,000 a year need not bid on a $750,000 apartment, unless there’s a trust fund with quarterly payouts or other money available. Also, lenders typically look for at least a two-year track record of income, which could hurt those who may have switched jobs recently.
• CLOUDY FINANCIAL PICTURE. Generally, total debt payments, including the mortgage, cannot exceed 45 to 50 percent of your adjusted gross monthly income. Borrowers may be surprised at what counts and what doesn’t.
• BAD CREDIT Lenders typically reject applicants with a FICO score below 620. Failing to pay your mortgage on time affects your score.
• LOW APPRAISAL. This is the predominant reason people are denied home loans today, according to industry experts.
• PROPERTY PROBLEMS. Issues within an apartment unit or a house such as major repairs have to be addressed. In our area of NJ, there are several condominiums with lawsuits pending against them that have turned into deal killers.
• INFORMATION MIX-UPS. About 12 percent of new mortgage applications were denied because of unverifiable information or incomplete credit applications, according to the Federal Financial Institutions Examination Council.

Read the full article.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Title Inc.

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 201-656-4506

E-mail vti@vested.com - www.vested.com

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Treetop Development makes news in Newark

Our client, Treetop Development LLC, made the news in Newark. In a fine story in the New York Times, Treetop's effort at building rehabilitation is highlighted. Read what Treetop and its principals, Adam Mermelstein and Azi Mandel, have accomplished here.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Title Inc.

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 201-656-4506

E-mail vti@vested.com - http://www.vested.com/

title insurance agent essex county nj refinances purchases settlement

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Sprucing up the home for sale? Don’t forget the garage

Realty Times’s latest edition contains some hints about one overlooked part of the home- the garage.

“They’re for more than parking cars, stacking boxes, and holding trash bins. The garage can help sell your home if you stage it right. Most homeowners might think of staging their kitchens and bedrooms, but the garage is a feature that is playing an increasingly important role.”

To increase the appeal of your home here are some garage related tips:

• Entice buyers with a garage that is organized, kept up and shows off its most important features. 
• Use walls and ceilings for storage. Consider having one or two loft-type storage areas built into the garage.
• Next, add lighting. It’s relatively inexpensive, but it makes a huge difference in increasing a garage’s appeal. Replacing the single center bulb with a strip of lighting is a fantastic way to spark a buyer’s interest.
• You might also consider coating your floor. A concrete floor in the garage can show off the wrong things, such as those icky, ugly oil stains.
• Make sure your garage door and opener are working quietly. The first automatic garage door openers became commercially used back in the 1950s and if you're is an original, it's time to upgrade!
• Next, finish your walls and ceilings. Many garages are not finished, but if you put up wall board you can complete the look of the garage. Finished sells better.
• Finally, add a coat of fresh paint.

When it comes to selling, a garage should be spacious, organized, and a place where buyers can imagine easily storing their own stuff!

 Read The Garage Can Help Sell Your Home by Phoebe Chongchua.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Title Inc.

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 201-656-4506

E-mail vti@vested.com - www.vested.com

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Is that the best mortgage you can get?

The New York Times suggests vetting the lender when you buy a home.

“BEFORE buying a house, borrowers will undoubtedly do a thorough check of the property, examining its structural soundness and the surrounding neighborhood, among other things; they will research the best type of loan, comparing interest rates, terms and fees. But not all borrowers do due diligence on their lenders.”

“Ferreting out good information is not that easy. For one thing, different kinds of lenders are held to different rules, licenses and disclosure requirements. Some states, like New York and New Jersey, require mortgage brokers to complete criminal background checks through the state police.”

 So what to do? According to industry experts they

“suggest that borrowers focus more on the individual who would be their mortgage broker, loan officer or loan originator. Among the questions borrowers should be asking them: How long have they been in the field? How well or promptly do they answer questions? Do they want to know the borrower’s financial goals? A look at their work experience and background on their LinkedIn profile may also be helpful.”

What should you look for?

• are good listeners, and helpful with personal-finance questions.
• size might be one factor. whether a blemish on a firm’s record, say a large number of foreclosures or a class-action lawsuit settled three years ago, will dissuade you from cultivating a helpful relationship.
• governmental and quasi-governmental sites may be helpful.

A minefield? Maybe. Read the full article to learn more

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Title Inc.

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 201-656-4506

E-mail vti@vested.com - www.vested.com

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