I was wondering if anyone would recommend getting a 125% mortgage to pay off credit card debt. House is worth 135,000, I owe 125,000. I have about $34,000 in credit card debt. My interest rates on the cards on average is about 18%. My current mortgage is 30 year fixed at 5.75%. Just wanted to get some input to see if there are some things I havent thought about or if anyone has other options that I havent concidered.

Thanks.
Dan

Do you have a car? You may be able to refinance that and pay off some of the credit cards, and then you could snowball the rest. a 125% mortgage is a big risk because if your house goes down in value you're going to have a harder time paying that back.

Better advice would be to not use credit cards anymore, in fact, just use cash from now on. Cut up the cards if you have to. There are probably lots of things you could do to cut back (Cable, internet, name brand products, clothes, entertainment, dining out etc.) By cutting back on these things, you could save hundreds of dollars a month, apply them all to the credit card that's closest to being paid off, and when it's paid off, roll it over to the next one and so on.

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Dan,

I am no finance guru, however have you considered this:

1) Why take a short term debt (credit cards) and turn them into a long term debt (mortgage)?

Your taking a balance that should usually get paid off within say 5-6 years or sooner, and transferring it into something that goes up to a 15-30 year term. So lets say you get it paid off within the 15 year term. That is 3 times longer than if paying within the short term cycle. So if you have an interest rate at 6%, then you are multiplying it by 3, the longer term. So 6 X 3= 18. So you go from 6% to 18% due to the longer period of time the same credit card amounts are financed.

2) Why take an unsecured debt/loan (credit cards) and turn it into a secured debt/loan (mortgage)? If you ever get to the point that you could not pay off the credit cards etc most of the time (depending on variables etc) it gets wiped out by bankruptcy. If you declared bankruptcy within the mortgage loan they take the house, and everything else included or secured within the loan.

I know its tough, and you certainly have to make the decision for yourself. However, for a little while, maybe you could find a part time job that pays well that you could use the money only or specifically for the credit card debts. After they are paid off go back to your usual way of life and work habits. Only make sure you DO NOT use any more credit cards along the way, or you kind of defeat the purpose of getting them paid off. Just think of being able to send in an extra $500-$1000 per month? $500 a month equals $6000 per year. At $6000 a year, but not factoring in interest rates, you could send in 34000 within 5 1/2 years.

All of this is only my opinion, but I do wish you all the best and hope you get the stress of it all off your back soon.