Hi all, My hubby and I are going to do a home equity loan. When we called, we found out his credit score is 640 and that we would only be able to do a 90% LTV loan. My credit rating is good..it's about 700. I have 3 individual credit lines on my report that have a total of $14000 credit limit. If I pay those off with the home equity loan and then put my hubby debt onto my now empty credit lines thereby freeing his up a bit will that raise his score? Also, he is listed as an authorized user on 2 of my accounts. Both accounts are about $5K and are pretty much maxed. Would removing him as an authorized user raise his score or lower it?
What other factors are affecting his scores? Does he have any negative accounts, what is his debt to available credit ratio, and how old is his oldest account? Same for you.
Let's see...his debt to credit ratio is pretty high..probably about 95%. There are a couple 30 day lates that are over a year old. His oldest account goes back to 1994. My debt to credit is high too..it's about 75% and I did have a couple 30 day lates...the same ones my husband has. Oldest account is also 1994.
oh another thing affecting his score is how recently a credit account was opened. He just cashed a $5000 check from a credit offer....
If you are both carrying 95% of 7K total available credit, that is one thing. But if you are at 95% of 40k available credit, and are looking to push your mortgages (first + ELOC) toward 90% LTV because you can't make any headway on your CC debt, you need to look at the whole picture and make sure you are choosing a path that will allow you to pay down this debt, not just dig you in deeper. As long as you have some equity, you can find some lender that on some terms will lend against it, but that does not mean you come out better by doing so. You need to look at your income, how to increase it, or at your expenses, and how to decrease them. How much is your total current debt, and therefore your monthly cash outflow to cover it? Have you worked out your budget to see how you would cover this debt, mortgage payments, and normal living costs, and whether that fits within your available revenue stream?
Well, we have 4 houses. 3 of them are rental properties and that always makes our Debt to earnings ratio look lower. One rental property is going to be sold in January. One rental property is only a $113K dollar house and we are just going to hold onto that one forever..pay it off and keep the rent as income. The third rental property we are going to hang onto for another 3 years. It'll bring a good $50k when it sells. Our gross monthly income without the rentals and including bonuses is $10300. Our monthly debt payments excluding the rental is $4360. If we were to do a 90% home equity loan on our primary residence it would reduce our monthly debt payments to $3883 and lower our interest rate quite a bit as some of our credit cards are at 24.99%.
You are not dealing with the usual consumer situation. You have assets offsetting those liabilities, and presumably rental income covering part or all of the mortgages on the rental property. You probably need to optimize your finances "globally", considering the relative costs of all available sources of borrowed money, and on an after tax basis, to determine the effect on your bottom line. Although tax law may treat various assets, sources of income, and debt payment differently, in the end it is what you get to keep that matters, and that is the amount you want to maximize. When you refer to 90% home equity loan, I am assuming that you have an existing mortgage, and you are looking at a "second", in the form of a home equity loan, that will increase your net liens against that property up to a total of 90% of its value. You would also need to check that the interest is still tax deductible, since this is going to pay CC debt, not a home purchase or home improvement. If some of your CC debt is from activities involving your rental properties, you may want to talk to a CPA on how to handle this to ensure deductibility of the resulting interest against your rental income. You don't want to be subsidizing the rental business with non-deductible personal debt. If you have CCs at 25%, you need to look into why.
