Hot answers tagged

237

This is a very generous impulse on your part. I'm going to criticize it, but please understand that I believe your intentions are great. What can go wrong You pay off her $40,000 debt. She is now debt free. You know what that means? Better credit. She can now borrow more money. This time she runs up $50k debt and is worse off than she was when you ...


116

I personally have no financial problems Are you in desperate need of a financial problem? Taking a loan to pay someone else's debt is the fast lane to a financial problem. Unless this is your spouse, because their debts would be yours anyway, do not incur debt for them. If the debt is insurmountable, have the person file bankruptcy and be available to ...


63

First, you loaning her money is out of the question. In my sternest Suze Orman voice, You Will Not. Money is more intimate than sex, and there is a very wide gulf between "listening to her commiserate" and putting your own skin in the game. Keep all liability firewalls up at full force There are several types of liability shields which are built into ...


38

The first step is to stop adding to the problem. Get on a written budget, cut expenses to the bone, have a modest emergency fund (1-2 thousand) just to help you get through true emergencies without borrowing money, and get as much of it paid off as you can. You might be able to consolidate the debt into, say, a new mortgage, but you need to be careful to ...


28

I currently assist a cousin who is struggling. Like your relative, she and her husband are in their early seventies, retired, and living on a fixed retirement income. Her husband is blind, disabled and in a wheelchair. He was the breadwinner so the larger income source is gone. She works two jobs and it just doesn't provide enough to survive. Out of ...


25

Obtain solid evidence that this debt exists. It is not impossible that she has been misled to believe she has a huge debt by scammers preying on the elderly. If you don't 100% know the debt exists and it is legitimate, you may all be scammed out of money.


21

Of course not. The two options are basically: The bank is out $40k and never gets paid back. You're out $40k and never get paid back. Why trade option 1 for 2? If you want to help her, help her get a good attorney and offer to cover the attorney's fees if/when she needs one (but see the other answers as to why she might not). Other users are talking about ...


20

Is there any difference/advantage for choosing a HELOC vs a Federal Student Loan? Federal Student Loans If you qualify for subsidized loans, no interest accrues while in school. Tax-benefit even if not itemizing (limits/phase-outs apply) Forgiveness programs exist (typically for public sector jobs). Flexible repayment (income-based, hardship forbearance/...


18

The bank I work with would be more inclined to expand an existing HELOC rather than write a new one. I think that would be your best bet if you decide to continue borrowing against your home. Consider that your own income would have to support the repayment of these larger homes. If it is, why didn't you buy a larger home to begin with? As far as increasing ...


15

Loans have a tendency to do that, kill you with the interest. Heck even if a person can afford the payments that is what is happening although it is well hidden. I mean after all, all the financial media, all television recommends a high credit score so you can borrow and buy from them today. Okay off soap box. If your house is worth more than the two ...


13

Rather than take on secured debt to pay off her unsecured debt, I suggest helping her in other ways. Start looking for resources/programs aimed at assisting those who are ill-prepared for retirement, low-income housing, food assistance, whatever. Attempt to negotiate rent down or consider breaking lease if the savings could be significant. Helping her to ...


12

Cosigning the loan means you are legally responsible for the loan, and the loan will likely show up on your credit report. Let's say, for example, that a bank would be willing to give you a loan of $50,000 based on your credit history. You cosign a loan for your father, for $20,000. Now, the bank is only going to be willing to extend you another $30,000 of ...


10

If I have a house that its market value went from $100k to $140k can I get HELOC $40K? Maybe - the amount that you can borrow depends on the market value of the house, so if you already have $100k borrowed against it, it will be tough to borrow another $40k without paying a higher interest rate, since there is a real risk that the value will decrease and ...


9

My HELOC has now grown to approximately double my mortgage So, how did it get there? If it was a one-time thing like you had major medical bills from an emergency, did a major renovation on the house, or maybe had to pay to ransom a loved one... go ahead and refinance this week. (Assuming you don't foresee it will happen again) If you aren't sure how you ...


8

Does your company offer matching on 401(k) deposits? Are you depositing at least to the match? If not, that should be priority one. Kill the card, never pay that kind of interest. Ever. Why are you paying 5%? The 30 year rate is 4% right now, and even if you pay some closing costs, you'll recoup the money quickly. In general, borrowing to invest is a ...


8

Yes, the product you want is a fixed rate loan. As rates were dropping in the late '90s, I went from a "Mortgage" to a "Home Equity Loan." The latter had a fixed rate, 15 year term, and a crediting structure for payments that ran by the day. i.e. unlike a mortgage whose amortization is unchanged if you make every payment 10 days early vs 5 days late, this ...


7

Oh, don't expect us to take sides, we love both our parents the same! As to the pragmatic decision making - simple math. The disagreement is whether to pay off the HELOC or to invest into the mutual fund instead. Well, check the yield of the fund, compare to the costs of keeping the HELOC balance, and see which one makes more sense. Just compare the ...


7

Your Debt is not something you “work on” - It is a HUGE, FLAMING EMERGENCY!!! The core of the problem is that you are spending more than is sustainable. While re-mortgaging might seem to help, unless you drastically change your lifestyle, it will only make things worse in the long run. Getting a second job can help, but only if you also change your ...


6

In short, your scenario could work in theory, but is not realistic... Generally speaking, you can borrow up to some percentage of the value of the property, usually 80-90% though it can vary based on many factors. So if your property currently has a value of $100k, you could theoretically borrow a total of $80-90k against it. So how much you can get at ...


6

Thank God you have your child back, it is so awesome that you finally found a medical treatment that worked. It must have been a truly trying time in your lives. That situation is an important template in personal finance. Through no fault of your own, a series of events occurred that caused you to spend far more money then you anticipated. Per your ...


6

I would pay off the HELOC today. The "safety" of having $24K in cash/stock is costing you $150 a month in interest. You still can have $16K in liquid savings to handle most all emergencies. From there, then you can decide which is more important - having a larger cash emergency fund or remodeling your kitchen. The kitchen is something you've wanted for a ...


6

US Federal student loans can't be discharged in bankruptcy, HELOC can.


6

Read and follow the instructions in this really great article about the subject: https://www.foxbusiness.com/features/lending-to-friends-and-family-your-4-step-guide CHARGE INTEREST I didn't know that you must charge interest or the IRS will charge you imputed interest. GET IT IN WRITING There are sample promisory notes out there that you can use. Does ...


6

If you are worried about your relative being able to have a place to stay DO NOT PAY THEIR DEBTS. Buy a house/apartment(complex?) and rent it to them. For $1/yr if you must. $40,000 also is quite a lot of rent money.


5

A Home Equity Line Of Credit (HELOC) is simply a special type of secured credit. Secured credit is credit provided to you, where the lender has some rights to an associated asset in the event that you default. In the case of a HELOC, much like a mortgage, if you default on the payment terms, the bank may be legally able to foreclose on your house, sell the ...


5

I am a real estate agent. I know you are in Canada, but will let you know that in the US, agents are not to supposed to offer this kind of advice. They can refer you to a bank or mortgage broker, but should not be giving this type of financial advice. That said, it's a HELOC, it would be rare for your bank to be willing to just add to your mortgage at the ...


5

Pretty sound strategy. The only pitfall is that with 21% equity (i.e.: 79% loan to value) you might not get any HELOC approved. From my experience the highest LTV they allow is 75-80%, so you need to check that. As @JAGAnalyst pointed out, and I missed, you're actually planning to use the HELOC as downpayment, and not as a cash for cash purchase. That will ...


5

I would tend to put it towards the HELOC... Assuming that you started off with a 150K, 30 year, if you keep going you'd pay off your mortgage about 3.5 years early. Not bad. However you have a fixed rate which is smart. Also assuming that your HELOC is around 2%.... To me the HELOC is a really high balance and as such represents a significant interest ...


4

I don't think it's all or none. First, 15 year mortgages are sub-3% right now, even for an investment property you'd get under 4%. shop around, do the math, a 1% drop is $1000 a year to start, nothing to sneeze at. Don't let the tax tail wag the decision dog. If you could invest the $100K at a taxable 5.5% in this economy, you would. In this case, that's ...


4

In the last housing crisis lenders modified home equity lines of credit. Normally a person is approved to a maximum amount. During the draw period they can borrow up to that maximum amount, they then start payments under a specific formula. If they pay it off before the draw period ends or even if they partially pay it off, they can borrow more money up to ...


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