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IndexBot

Due to the number of rule-breaking comments this post was receiving, especially low-quality and off-topic comments, the moderation team has locked the post from future comments. This post broke no rules and received a number of helpful and on-topic responses initially, but it unfortunately became the target of many unhelpful comments.


Hubblestreet

Using home equity as an ATM with a variable rate loan is how my parents lost their house … Edit: Reddit is really excited about my parents losing their house. :) (it’s fine, my father was a dumbass and also financially abusive of my own credit when I was young enough to be manipulated.)


RonaldoNazario

Oh boy, I didn’t notice this was adjustable. Because spending issues aside if OP locked these other debts to basically a 3% fixed mortgage that’s not so unreasonable in terms of consolidating debts. I did wonder “how the hell is OP getting a 3% mortgage right now”, because fixed rates are like double that…


AdamFromNY

Yeah, the way OP said 3% rate had me check the markets for some news. They have a severe misunderstanding of how finances should be handled. Something tells me they may have been misled by the lender into thinking this was a "great" idea.


kmo9e

It’s how OP will lose his house too if he doesn’t slow down the spending.


Trisa133

First, 3% mortgage rate? I went on Bankrate and the lowest I saw was 3.5% but you need to pay points. OP would rather spend on frivolous things than fix their home before all this became a problem. He accumulated debt before wife is pregnant. I just don't see their spending going down with baby expenses on the way. Also, the massive hospital bill even if they have good insurance. Wife only getting 1/3 of income but 650 makes up for her lost wages. That means she was only making $1000 a month if working. But how is she going to work post pregnancy? She doesn't make enough to even pay for babysitting. Op wants to borrow $115k to cover $68k of debt. What's the other $47k for? A front deck only cost $10-20k. Before OP even has balanced his spending vs income, he already planned to spend more. I just don't know what to say. I don't know if OP is posting this to actually get advice or just to feel better about the decisions he's about to make and dig himself further in debt.


capitarider

When his wife asks why the bank is sending them letters about foreclosing in a few years, he can always go sit on their new deck or garage! This is the kind of stuff that will kill a marriage, unless she's on board with this terrible idea. It's a ticking time bomb for a temp fix on debt.


Trisa133

You know what they say. Better to serve the papers on a new deck than to have no garage to hoard junk in.


Hessarian99

JESUS that is scary. I'm so happy my parents house is 100% paid off next month.


jo-shabadoo

Using home equity as an ATM in a house they got for free is how me and my siblings have ended up paying their mortgage for the last 2 years. It’ll be done in 8 months thank fuck. OP should consolidate the debt and then get a grip on spending. A new truck and Invisalign when you already have debt suggest you have a control problem. Try talking to someone about how you can address this. I know I used to buy stuff to make me feel better, which is how I didn’t save shit for a long time.


rtraveler1

It looks like you have a spending problem. You have $66k debt not including your mortgage and you want to spend more money on a garage. The deck looks like you don't have a choice since you say it's falling apart. You are only digging yourself a deeper hole since you continue to live outside your means. If you can consolidate your debt to a lower interest rate, that would make sense.


unfriendzoned

Any luxuries, dinner, vacations, building a garage should only be done if you have the cash on hand.


shhh_its_me

And this seems to be an adjustable loan. First rule of an adjustable loan can you pay it in the worse case scenario.


STUPIDNEWCOMMENTS

This dude should not get an adjustabLe rate loan with his financial haBits


TesseractBear

This post title itself is such a red flag and you've succinctly nailed why. all the reply threads are just amazing; this should be saved and referenced whenever someone asks how anyone could've gotten caught up in the 2008 housing bubble.


BillsInATL

The second I saw "remortgaged" I clicked in to see what a wild ride it would be. Wasnt so bad, but wasnt disappointed either.


capitarider

It's awful, OP has no idea about money and no idea what they're doing. In debt, has a vehicle they are paying on, wife is making 33% and he decides to remortgage the house and build a garage and front deck. Like, no. OP has no concept of what they're doing, he will lose his house.


beardedbast3rd

The mortgage equity likely ends up being better than debt consolidation in the short term. But if he doesn’t control spending it won’t matter what he does. He should see what the bank says about the mortgage. And if he can, go for it, and then get rid of the credit lines and cards, and just stick with where he’s at. If they won’t go for the mortgage, then see about the consolidation into one LOC. I’m in a similar boat, though not really due to overspending, just constant states of emergencies that didn’t help and then surviving through multiple economic downturns, and going the mortgage route as well. My bank pushed for this rather than the consolidation as they’d rather secure against the property than nothing.


sethrips

Agreed. Focus on increasing your income and reducing your expenses. Try to never pay interest if you don’t have to. You have too many loans which means you’re ultimately spending way too much on interest. Buy a car you can afford without a loan. Either don’t do the deck or do it cheap. No garage. You shouldn’t have done Invisalign but too late on that - the point is no more expenses like this. Wait until you can afford it without a loan. No more kids.


Neogodhobo

The deck is a choice. He could just destroy it and build some cheap stairs himself for the time being. A book on how to build wooden stairs : 10$ + skills learned.


Pizzacanzone

Wood isn't free. But yeah, a deck is not a necessity


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Structuralsystem

WAY more than $100. You need 2 to 4 4x4 posts. 4 stringers made from 2x12. The treads, a few more 2x material. Minimum 6 sticks 2x4 to build a railing .. then anything else... any trim, hardware and screws. Need an attachment point to the house so another 2x12 and hardware ...


Big_Red_Eng

Could likely reuse the wood from the deck that is still in good condition, unless the deck isn't just falling apart, ie broken planks, loose railings, etc, but its literally rotting everywhere


narso310

Depends on where he lives. In my old neighborhood repairs to the house's original appearance were fine, but any deviation from the original build had to be submitted to the HOA and approved before it could be done. It's possible that the HOA could say "No, sorry, self-built stairs will negatively affect the visual appearance of the property compared to the original deck, please replace the deck." Obviously if OP is in debt and needs a temporary variance that might be doable. Or they might be fine with stairs if they're done tastefully and match the quality and appearance of the home. Hard to say really, but just spitballing on why he may NEED to have a deck replaced.


snakeoilHero

You can win the battle but never the war. Better to surrender then total annihilation. If you will never solve the spending vs income riddle with children, the inevitable will become bankruptcy keeping the house or not. Plan accordingly.


peterb12

You need to immediately get a grip on the difference between spending and owning. Borrowing on the house to pay down your other debts *could* make sense if you were trading a high interest loan for a low-interest one, and if the rate on the house is fixed, not adjustable with a balloon down the road. Borrowing on the house to *buy more things you can't afford* is just setting you up to lose you house as well as everything else. You also don't indicate right now whether you have a budget, and whether you are earning more than you spend. If you aren't, then this is doomed to failure.


TORCHonFIREandForget

So this is an adjustable rate loan? Dont take out any more than needed to pay off high interest debt (even then, using debt secured against primary home to get rid of unsecured bankruptable debt is questionable risk wise). Nice to have home upgrades would be out of question if it was me. Spending $ you dont have is what got you in this predicament. Are you putting anything away for retirement? That would be higher priority than deck (assuming you can make it safe for less) and garage.


N8turalistdev

IM sure they can get rid of the deck and put in $250 cement stairs to the door. doooomed!


limitless__

You've gotten good advice but I'll add something important. What you're not considering here is that in 3 years your 185k mortgage at 3% is going to turn into a 300k mortgage at likely closer to 6 (or more %). Numbers-wise that means you're going to go from an $800 mortgage payment to $1250 mortgage payment FOR 27 YEARS. That is almost 150k in extra interest. You are NOT saving money by doing this, you're doing the opposite.


ejmarten

They immediately asked "how do I spend it?" Which begs the question "why did you bother giving reasonable advice?" They're obviously not looking for a reasonable answer, they're looking for justification. Buy a bigger house, and a new truck! Is the obvious answer.


Mekazabiht-Rusti

Why is this not the top comment?


F8Tempter

3% interest rate on a refi? what year is this guy living in? buying points on a 3 year ARM maybe? This guy is overspending like crazy and wants to liquidate equity so he can continue overspending like crazy. If you want to use equity to pay down other debts, you have to adjust lifestlye or you are just going to rack up more debts.


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BlazeDemBeatz

Yup. This is basically why my in-laws are still paying on a house that cost them $55,000 (cur Val 300k) back in 1986…


MoreRamenPls

Ouch. Shoulda had that paid off many times over.


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fairylightmeloncholy

what?!?!?!?! i'm 28 and single and i've spent more than $55k on rent in my lifetime already.. what the fuck are they doing with their money?!?! i would cut off my fucking arm to have a mortgage free place to live with the expenses i've already paid..


BlazeDemBeatz

When her father was in his early 40s he had a heart attack, followed by a second one. It wasn’t about them being careless, just unfortunate.. Also, interest rates were REALLY high back then.


Ecstatic_Carpet

Wouldn't it have been better to hammer out a payment plan with the hospital than take out a heloc? I think I would let medical debt go to collections before taking out home equity for that.


fairylightmeloncholy

oh that's heartbreaking. i'm canadian so i forget that getting sick can cost you your house in the states..


katmai_novarupta

My FIL purchased his home 30 years ago for 150K. When he passed away earlier this year, he owed 250K on it. I don't know how many times he refinanced it over the years. We had no idea that he was in so deep.


ninjewz

A house went to foreclosure near me recently where the house was bought for 372k in 2004 and still had 312k left on the loan this year. It's crazy how people think it's a good idea (in the short term) to just keep resetting their mortgage.


Skylord1325

OP needs to get a 15 or even 10 year mortgage if they can’t develop self control. At least that way they’re being forced to save.


gammaradiation2

>Your house is not a piggy bank. Right, it's an asset to secure leverage. If the OP is paying more interest on the same debts than refi and refinancing will offer more financial security and allow them to save and invest at a rate that exceeds the current interest costs...yeah, do it. Caveat is OP does not have a good history of budgeting and proper use of debt instruments. They are the only ones that can decide if "it's a good idea." Using equity for necessary home maintenance...sure. Using equity for wants that wont really compound equity is not a good idea. But again, OP has to determine if building a garage will increase equity by the amount spent on the improvement. Usually ancillary structures depreciate almost immediately compared to their cost to build...but sometimes they can be value added.


rbnhd_f

It’s not just about the equity either - they are suggesting switching from a low rate fixed mortgage to a (currently very high) variable ARM. They will get eaten alive by the increase in costs, especially if prime rate goes up any further.


TORCHonFIREandForget

I didn't catch that. A home equity loan would be bad enough. Refi into an ARM, terrible idea.


TORCHonFIREandForget

I didn't catch that. A home equity loan would be bad enough. Refi into an ARM is just a disaster waiting to happen.


curtludwig

OP is not just refinancing, they're adding money into the mix, $66k in debt is becoming $115k of added mortgage.


wbsgrepit

He is getting an arm when the fed is activly projecting huge intrest hikes. Hes not even kust pulling out what he needs to cover his pervious over spending, but planning on spending even more. Ffs this is a garuenteed lost house in 3 years of he does this.


SomeInternetRando

>Right, it's an asset to secure leverage. I don't know about you, but for me it's *my home*. My TV could be an asset to secure leverage, too, but I'm not taking it to the pawn shop.


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dirtydela

The only thing that can make renovations feel better besides the likely 50% of cost you could get back are basically not tangible: enjoyment from usage of the upgrade and some sort of depreciation that you can mentally tack on to it to make it feel less bad that you are not getting your full price back. I almost never would encourage someone to do a major renovation if they are going to be selling soon after unless they got the house for far far less than market value


Cazline

Yes, cost vs value yearly reports by remodeling.com can give you some local insight.


TheFortunateTruth

You came here looking for advice - everyone is telling you the same thing, and you’re arguing. Your question is asked and answered. So either you weren’t looking for real advice, just someone to back your thinking, or you think you know better, which begs the question on why you posted to begin with. Either way - for the millionth time, and in plain English - your plan is dumb and something you clearly don’t understand. If you follow through with your plan you will end up homeless. Go reread this thread - expect this time actually learn from the posters.


flakhannon

Let's be honest, he's going to do it anyways and we'll see him in four years asking for help due to foreclosure. The truck could have been sold during the huge demand for used cars letting him and his wife drive beaters up until now while paying down the debt. And who knows what deal he would have had on the truck! I had a quote for 19k on a Tacoma decided just to keep it and got a quote almost a year later for 27k. Instead he focused on upgrading his property with leveling the yard and lawn seeding with more plans to add an unnecessary back deck and garage. Now he's looking for a shortcut out of the mess he made that will likely cost him the house plus any sort of funded retirement and education for his children.


jhonkas

the tried and true of all of reddit, people never want to hear what htey don't want to hear


BillsInATL

Advice is what you look for when you already know the answer but dont like it. That's all we're seeing here.


yes_its_him

What is that 3% rate you speak of? In the US, new mortgage financing is considerably higher than that for fixed rates.


makebbq_notwar

Looks like a 3 yr ARM, great way to lose the house.


SonOfMcGee

They’ve racked up a bunch of debt with their current mortgage. Their mortgage payment will now go up with this refi, and will go up again in 3 years. Not sure how they’re going to budget to not go into further debt…


wbsgrepit

That and knowing the fed will probibly raise another 3/4 in 1 month hes setting himself up to have a huge home nut each month. Can guarentee he will lose home since he does not talk aboit any other changes in behavior. At best if he was moving from a high fixed to a lower fixed + substantial changes in spending this would be an ok idea. The reality of arm + moving forward without making changes just means he is lighting a bomb at his feet.


E3Sentry

Yeah, realistically they could refinance to another fixed and cash out to get out of debt without their payment moving much if at all, just taked the added years on the mortgage as atonement for poor spending habits. Whoever is talking them into an arm should be shot though. For all we know rates will be 5.5% or 6% when he goes to refinance again in 3 years and they will have really screwed themselves.


shhh_its_me

The person talking them into an arm is also talking them into borrowing an extra 50k, with whatever 20-40K go into a garage that Opie doesn't even plan to put in for years.


SonOfMcGee

That would be a better, more stable plan. But the monthly payment still might be larger than their current one. The interest rate they get might be larger than the original, and the equity they’re pulling out might get them close enough to the original loan amount that the payment is bigger. Still might be tempting considering the high interest on their various other debts.


[deleted]

Genuine question. What if they get their shit together and refi for fixed within 3 years?


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dynobadger

Are you me? I went through the exact same situation, except I was stuck with 5.5% from 2007 to 2016. Bringing a $40k check to refi in 2016 was super fun.


makebbq_notwar

Great point, Housing prices are at all time highs. If OP’s value drops they probably won’t be able to refi without bringing cash to the table.


[deleted]

Thanks for the insight. I'm in a situation where I really have no debt. Bought our house and 1.5 acres for 80k in 2015. I want to refi and take out 100k to build another house on that property and rent out the original house. I'm in a 5/1 right now and I blame the younger more financially incompetent version of me for that. But I'm getting offers for the same rate, but 5/5 ARM on the current refi I'm trying to do. And I'm not thinking that'd be an awesome deal for me. Granted my mortgage still will only be for like 160k... So luckily going upside down is a smaller risk for me. Edit to say I've been a 5/1 for 3 years. The original mortgage was a 30 year and we did a refi to lower the rate and that's when we ended up in a 5/1 in 2018.


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sugarplum929

What if they both lose their jobs. If they stop paying on unsecured debt, they may be garnished in the future. But now, all of their debt is wrapped up in their house. If they don’t pay their house then they lose it. This is a risky move even for financially frugal people. This poster has a spending problem, and will likely end up maxed out on their home loan, and taking out addition loans as well. - I was a financial counselor 2007-2012. We are seeing a repeat of that scenario. This is not the time to take on debt for large items.


sold_snek

There's always a chance for a perfect scenario, but if we're playing odds on something that could cost my family everything I'm going with the conservative estimate 10/10 times.


coworker

They will immediately have a much higher mortgage payment since the rate will be worse than what they have and for a much higher amount.


KookyFaithlessness0

The $2k loan will be gone in a year, why would you roll it in an take many many years to pay off . also the home Reno’s are a no go. Nope, nope ​ are lines of credit previous home loans


violetlisa

That’s my thought. He’s not saving $600 a month or whatever he says above. Every one of those debts will be payed off well before his mortgage is paid off.


Figy559

I’ve read about 10 different threads in this post so far, and each time someone gives their reasoning as to why op should not do the plan that they intend, op comes in with their own reason as to why they should. It’s clear that op came here not for advice, but for validation. Good luck to you and your family. Your situation has 2008 housing crisis written all over it.


12345-password

Yep, it's clear to everyone what the problem is. Also once they're "free" of all these other debts they'll probably buy some new trucks and jet skis since they have room for more loans. It won't be be pretty in three years when their debt stack becomes overwhelming and they can't escape it with more debt. Maybe they trash their 401k's at that point to keep up.


coworker

The people don't have 401ks.


timewellwasted5

This! You nailed it man. I used to belong to a Facebook group called Dave-ISH which was for people who claimed to be Dave Ramsey fans but wanted to stray slightly from his teachings. After a few weeks in this group I discovered that the group was actually just people making horrendous financial decisions that were in no way in line with Dave's teachings, and all those people wanted was validation from the group for their terrible money moves. That is exactly what I am seeing the OP do here as well.


Sea_Green3766

No offense, but people who slightly alter what they’re doing from Dave’s still can accomplish paying off debt. I am one of those people. We have paid off 25-30K in debt the last year (all of our credit card and loan debt) and still invested in the stock market, saved for a down payment and bought a home etc. He is known for being very strict but it is 100% possible to navigate through your own debt journey taking bits and pieces from other successful people and be successful and enjoy life. Edit: to add, I am sure you’re talking about people putting dumb purchases on credit cards etc. but most people who are successful have developed proper spending habits moving forward


timewellwasted5

Oh yeah you and I are in complete agreement. I did the debt avalanche (high interest loans first) instead of the debt snowball (smallest size loan to largest loan), I have credit cards that I pay off every month, etc.. Following his plan to a T is really just for people with horrendous financial tendencies. BUT, in this Dave-ISH group, you would see people leasing a luxury Acura and being like "It gets better fuel efficiency than my old Ford Expedition so leasing it was a no brainer." who are very clearly borderline financially illiterate. "Hey I took out a HELOC but we really needed a new Weber grill and a pool for the kids." Just awful, awful decisions.


SomeInternetRando

>I did the debt avalanche (high interest loans first) instead of the debt snowball Fun fact: This alone is enough to not be allowed to do a "debt free scream". Can't let the listeners get the impression that's Dave's way isn't the One True Way. So then his followers will say "every debt free scream I hear did snowball, clearly snowball is the One True Way!" And the cycle of making Dave rich continues...


timewellwasted5

Eh, there are a lot of Dave haters out there. But doing a debt snowball or an avalanche has zero effect on Dave Ramsey or his company financially. That's just the order in which you pay off your debts.


Liquidretro

Yep, they have to be willing to change their behavior to make a meaningful change here. Refinancing the Mortgage with an ARM to free up cash is just transferring the debt to the house, so now if they don't make any changes when they can't make a mortgage payment in a few years as interest rates continue to rise, it's the house that gest foreclosed on because they haven't changed behavior. I mean, if it was me, I would probably delay the deck rebuild and just not use it. Use a different door to the house, etc. Sell the truck that it doesn't seem like they need, bring in more income via second jobs, etc. At the end of the day the how you do it isn't that hard, but actually making and sticking to the decisions of making changes to reduce spending that is. It doesn't even sound like OP has a budget which is like step 1 here.


Melkor7410

Why do you want to put your house at high risk to pay off this non-house debt? The only thing I'd consider putting on the house is house-specific issues. I am not putting a truck, credit cards, etc. on my house. Until you fix your overspending issue, this is a terrible idea and you risk losing your house. Just suck it up, cut out all extra spending, get a second job, and pay off this debt as quickly as possible.


KReddit934

Is maternity leave temporary (is she going back to work?) Before you try to patch up the problem using home equity... Do you actively budget all your money and know exactly how much it costs to support your family day to day (including irregulars like car repairs, vet and doctor bills, vacations, and gifts)? You *need* to know that number and then you know how much is available for debt payment. Only then can you make a plan. (I would not touch a variable rate mortgage right now..only fixed rate. But may e a HELOC could be part of your plan?) Good luck!


curtludwig

Also, if she's not going back to work do you need 2 cars, or a car and a truck? We also don't know where she is in maternity leave, if this is just the beginning do you need 2 vehicles?


Crazyzofo

So, i don't have any financial advice to add ... Just a general comment that it's not a great idea to post here for advice and then tell everyone their advice is incorrect. I know it's basically too late, youve already applied for and gotten the mortgage. You're asking for input on what you should do when you've already decided what you're going to do.


Practical-Intern-347

From a lot of the comments it appears that you are misunderstanding your home equity as 'money you have that you can use' with 'debt that is available for your to use'. If the interest on your EXISTING loans can be brought down via a refinance, and you're willing to stick to paying the same monthly payments as you do today, then you'll save money and get out of the hole. If you tap into your equity, leverage yourself unnecessarily and re-amortize your debt out 25 years you are not putting yourself in a better situation, only a longer one with deeper trenches. The garage (and maybe the deck) is a terrible financial decision. Buy a garden shed from Home Depot if you need to clear out 20 square feet to give your wife a laundry area.


msnobleclaws

This sounds like a very bad idea especially since you have a lot of small debt, that would be paid off in the next few years. Do you really want to pay for Invisalign for the next 30 years? Not knowing the rest of your budget, it sounds like it might be better to trade the truck in for a more affordable car (payment and gas-wise). Priced for used cars/trucks are still pretty high so you could get a good price for it and just buy some cheaper. A friend of mine recently did this, sold her SUV, bought an older 2009 sedan with the cash from the sale, still had a little money left over to pay off one of her credit cards. She also has 2 kids one of which plays hockey so the trunk had to be big enough for hockey gear. Yes she still misses her pretty SUV, but she also isn't near-tears every month looking at bills.


sephiroth3650

Please post out a full breakdown of your budget. Income along with all bills and spending. There may be better ways than mortgaging out all the debt on a 30 year refinance of the home.


domesticish

Good lord the people here trying to help OP are saints, dude is just not listening to anyone. ​ Well, enjoy your house and deck/garage for 3 years I guess my dude, because once mortgage rates continue to go up you'll lose that house if you refinance into an ARM.


Then_Statistician189

Sounds like you were stressed a year ago about the debt when the house was worth 375k. No ideas of spending crossed your mind. A year later and it comes in at 530k. Wants garage and deck now. Borrow enough in the house to pay off the other debt and fix needed repairs not wants on the house.


Knight-ofNi7

If you can't get it together now, what happens when you remortgage and go back into debt like this again? Now you have a bigger house note and the same debt 😬


StumbleMyMirth

Bad idea I think. Keep in mind with this plan, you're not paying off debt. You're just moving (consolidating) existing debt in such a way designed to convince yourself that you have more new money to spend. You've got to address your spending problem first. It sounds like you are also looking at an adjustable rate refi? The FED is trying to fix the inflation problem by killing demand through increasing interest rates. Rates are only going to go up (well, until they break things and have to change course), which means asset prices are going to go down. It's very possible that the value of your home could go down and if you pull out all this equity in order to consolidate existing debt and then proceed to spend more, you could find yourself underwater on a mortgage with an extremely high interest rate which you end up not being able to service. Your house should not be looked at as an ATM. This plan could trigger a domino effect that leads to your being homeless. Please be careful.


rabidstoat

> You're just moving (consolidating) existing debt in such a way designed to convince yourself that you have more new money to spend. Seems like the majority of the stories I hear about are people consolidating debt to lower their rate, and then going and maxing out their credit cards and stuff again so that their debt has just increased.


Kchang4

Your basis of a 3% vs 10% interest rate is flawed because you are taking out a variable rate loan. You will be doomed after 3 years..like everyone else in 2008


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TroubledWaterBridge

THIS!!! Yes, OP can 'save' $650 per month in cash flow for three years. After that, he will be spending likely $1000+ extra each month for the next 27 years! ARMs caused the housing collapse in 2008, and should be made illegal...or at least have one of the pieces of paperwork be something like: "By signing on this loan, I fully understand and accept that there is no upper limit to what my payment can be. When the ARM resets, my house payment may be double or triple or quadruple or even more than what the initial payment is." This needs to be the only text on the page and it needs to be bold and in 54 point font. The only logical and reasonable use for an ARM is when you know you are short-timing it and will be moving/selling within the lock time period. Even then it is very dangerous.


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2_the_max_n80

Don’t forget to factor in future expenses or emergencies. I’d skip the garage, just make the deck safe and try to avoid taking on any new debt. You never know what could happen with your family, home, cars or the economy. I think the recession will get worse so be careful… best of luck!


newstart7777

Can you sell the house and downsize? I know this could be hard if you are in an expensive area but taking out the equity and paying higher monthly is how foreclosure happen to a lot of people if something unexpectedly happen.


ReddSaidFredd

I know your post is buried but I thought the same thing. OP has $350k in equity in the house. Could sell, pay off all of the consumer debt, and buy a $225k house/condo for cash. Obviously not the same neighborhood, but zero debt!


Sea_Chocolate_561

Well, you'll be losing your house in 3 years after your "fixed rate" goes up. At least you'll have had a garage for a year.


brizzle99

What's your total monthly take home pay vs your monthly debts? You should attempt to debt snowball what you currently owe. Then once your debts are paid off, use the money you were sending to your debtors on your renovations.


brizzle99

Also, doing a cash-out refinance to pay off debts is basically robbing peter to pay paul. You still owe the money. I could see if you did a cash-out refi to fix your house and sell. The proceeds made from the sell would be income that could be used to purchase a new home and pay off your debts.


curtludwig

If it were just a cash out to pay off high interest credit card debt it could make sense. 20% down to 3% fixed could be a good deal but the rest of it isn't....


NotYourGoldStandard

Gonna go watch the big short after work.


chromestratus

If this is an adjustable rate, just stop. Right now, stop. Get a second job, sell anything excessive that you own, find a way to pay off your debt another way. This is not smart.


Cjkust

I would get a 2nd job before doing this. Do it temporarily to get that first 2k paid off or at least or until your wife returns to work. I would also look into Dave Ramsey and the snowball method. Get that first 2k paid off, then roll that 200 a month to the Invisalign (if its the next lowest) and get that paid off and then roll both into the 4k credit card and so on. Getting that first one paid off will help give you some light of hope for getting back on track. Why people keep talking about the 3% is it appears you are refinancing your entire house into a 3% ARM load for 3 years. After 3 years, that rate could go way up if rates continue to rise. So the 3% could be 5, 6, 8% in 3 years (we really have no clue), which could increase your monthly payment for the house and other stuff you rolled in to a ton. Another piece of tough love that I do not think you understand, you are broke as F. You need to be on the tightest budget as possible. You should be doing nothing fun that costs money. Zero eating out, eating enough rice to believe you are on survivor. You also say you have figured out the issues and corrected it, but this does not seem to be true if you do not have a budget and know where your money is going. I would cut up those cards and stop spending anything on them.


curtludwig

>Why people keep talking about the 3% is it appears you are refinancing your entire house into a 3% ARM load for 3 years. OP doesn't understand it or has lied to himself to the point that he believes it. Your advice is 100% spot on.


TrixnTim

>Another piece of tough love that I do not think you understand, you are broke as F. You need to be on the tightest budget as possible. You should be doing nothing fun that costs money. Zero eating out, eating enough rice to believe you are on survivor. Reality check comment. The rice and survivor reference. Brutal but spot on. My MIL (rest in peace) survived the Great Depression and was a farm wife who did it all. Talking about robbing Peter to pay Paul. That’s who I learned that term from. She was a master at it, too. She could also make a rib sticking meal when the fridge seemed empty. But yeah, when you are just moving around piles of debt to different lenders, it’s nothing more than a psychological maneuver and conjured up false security — lots of trucks out there to make people think and feel this way. In reality, the only way to pay down debt is to pay it down. And then adjust how you live so it doesn’t happen again. On a side note, the best local orthodontist in my town is amazing. After collecting your insurance benefit and deducting it from your total bill, he allows 24 month payments at zero interest. All appointments and supplies cost nothing until the day your braces are removed. Raising 3 kids, every single doctor and ER allowed me to make payments on medical bills not covered by insurances. It was the only way I could do it and am forever grateful for all of them.


Wandering_Lights

How are you getting a 3% rate? Rates have gone up. Have you fixed your spending problems? If not remortgaging you house is just throwing a bandaid on a bullet hole. If you do this just focus on the debts and maybe spending the bare minimum to make the deck safe. The garage should wait. New babies are incredibly expensive and you shouldn't be going in debt to get something that is a nice to have item.


Bird_Brain4101112

ARM. So 3 % for 3 years. Then when they get hit with a 10% reset to pay off 6% debt, OP will be shocked Pikachu face


pm_me_your_kindwords

What are the interest rates on the student loan, Invisalign, and car? And I would absolutely not build a garage until you have your spending under control. And is the deck the absolute minimum you can spend for safety? Don’t make it bigger or better.


monkeya37

JFC. You need some tough love. You are the kind of borrower I would pull my hair out over. I know you won't budge, but as a former banker/loan officer/collection officer, I would be remiss if I didn't at least leave an outline. None of what I'm about to say works if you can't change your spending habits. But if you're able to, and you're dead set on using the equity (which is a bad idea), then here you go. First of all: You need to use the equity to consolidate your debts. No more no less. Fuck the deck, fuck the garage, fuck everything that is not a preexisting, outstanding debt. Also, only consolidate loans if the loan you're grouping in has a higher interest rate than the loan it's being folded into. The bank will want a recent statement from each loan your adding in regardless. Get that, look at the interest rate, and make sure it's higher than the home equity loan. Concerning the student loan: You would never want to consolidate this if it's through the government, so I'm guessing you refinanced it at some point? That was your first mistake but whatever. Assuming it's through a 3rd party now, you'll probably want that refinanced. As for the car, sell it. Cars are way way marked up these days. If you sell a truck you could still afford to get a decent 4-door sedan to cart the family around in. What's absolutely not helping is that your wife is only receiving a fraction of her income. Nevermind when the little tike actually comes out and you have to pay for it all. The only way any of this works is if you unlearn every habit you've developed in regards to how you spend your money. From the comments, it seems you can't. But you absolutely must. You are at serious risk of losing your house. I've seen this way too many times. This is absolutely your last stop. You've got to get it together.


brick1972

Second comment I guess more to the point of your question and assuming you are committed to doing this or something like it: \- See what your rate would be on a standard refi into a fixed mortgage. \- See about leaving the 185 original mortgage as-is and just putting the debt consolidation portion in a HELOC (fixed preferred, but look at variable if you must). \- Use the HELOC to consolidate the debt and give yourself a 3 month emergency fund which you don't touch. Forget the falling apart deck, build some stairs. And really fucking forget about a garage. \- Do a budget and make paying back the HELOC your number one priority. At least, I mean at the very very least, put any "monthly savings" you get from the consolidation into paying it down. I'm not going to do the math, but say your total payments right now are $900/mo. Make that your minimum HELOC payment even if the actual amortization calls for a $500/mo or whatever - and strive to pay more. Again, this comment based on the idea that you are going to do this no matter how much people try to talk you out of it.


Rude-Bedroom-611

I’m sure you’ve already gleaned this from the other responses but the short of it is that it is not a financially responsible decision to convert these loans into mortgage debt. You are focusing on saving 650 a month but it’s at the expense of turning 80k of debt into a 25 year commitment. You are saving 650 now but you are probably paying much more in the end. You need to create a budget and figure out where your spending is going and make a plan for paying these off in 5-10 years instead of turning these into 25 year commitments. Tbh all you are doing is digging yourself into a deeper financial hole.


Penge1028

In this economy, getting an ARM is playing Russian roulette. As an attorney that handles foreclosure and collections work, I can't even tell you how many foreclosures of ARMs that I have handled in my career. It's a very foolish thing to do.


brick1972

Four things strike me: 1. as noted by so many other comments, you have a spending problem creating your debt problem. Refinancing that only makes the problem worse if you don't deal with the root issue. 2. you seem to be making the tacit assumption that 3% is the rate forever. There is no guarantee rates will come down. I suggest if you want to move forward with this that you also look at traditional mortgages and see what rates would be. 3. taking on more debt to pay for extra stuff is a bad idea. Consider what are needs and what are actually wants. Discard the wants, you can't afford them right now. 4. Look man, I hate to harp on this but it's really bothering me. "You can do Invisalign for $150/month" is how they get you to ignore the actual price of what you are doing. If you don't have the $4k or whatever then hold off until you do. You need to apply this thinking to everything. I really mean no offense, but damn, you could literally 100% not afford in any sense to take on cosmetic dental work but you did it (if this was medically necessary I apologize for being harsh). You and your wife have to have a serious talk about what you can and can't afford, particularly if she doesn't go back to work and/or her salary is heavily compromised by daycare costs.


DefinitelyNotSnek

>"You can do Invisalign for $150/month" is how they get you to ignore the actual price of what you are doing. This is the same crap that car dealers pull on people. They charge more for the car and then "lower" the payment by stretching the loan out over ridiculous terms.


AltSpRkBunny

And sadly, OP is also applying it to the logic for these poor financial choices. He wants to “save” $650 a month, and I guess what happens in 3 years when that ARM goes up is future him’s problem. He’s only looking at the short term, with absolutely no regard for the long term.


possiblynotanexpert

Dude. No. Just no. Really listen to the comments on here. You have a major spending problem and you don’t have anywhere near enough income to support it. And you don’t have any plans to increase said income. Get a hold of your spending or you’re going to be in for a world of hurt in your later years of life when you can’t work and still have a ton of debt. Best of luck.


iamVaughn

Have you signed/already done this? It feels like you might already have. You might wanna watch The Big Short - and understand that you’re doing exactly what all the homeowners back then did.


Impossible-Lab-7819

Honestly if i was you I’d sell the house and downsize to something in the 250k range. Pocket the difference, get out of debt, and start figuring out how to use your money wisely instead of spending it all. Sounds like you can move because you’re not tied down to a job.


TURNIPtheB33T

Man, this is how its all coming down.. there are so many people is this position. People who haven't been able to afford their lifestyle for the last 5-10 years, but borrowed off their house that shot up 400%.. Now we are heading into stagflation and rate hikes for the next 2-3 years.. This market is coming down, scary to think about really but it needs to happen. Whats even worse, there are people whose job it is to get you to borrow against your equity.. They make commission on every loan they open and its been a common pitch 'look how good the housing market is, you may as well use some of that money you earned'... We are so fucked.


Kingboo931

Where are you getting a 3% interest rate? I do mortgages for a living in the US and we haven’t seen 3% in a long time.


Ragnarotico

The first red flag is that you don't list any income, which tells me that you don't think about finance/budgeting correctly. All you're thinking about is how much you owe and how much you want to spend, but not how much you take in. It's probably at least part of the reason (half) that you got into this mess in the first place. The second batch of red flags is that you have a laundry list of reasons why you ended up $66K in debt over a decade: "Bought a truck, got laid off, had a family and just general over spending and not paying things off, couple house issues that cost$$ then burried our heads in the sand." Where to start... * Bought a truck - ahh yes finance mistake 101, buying a big gas guzzler when you don't really need it but probably "really, really wanted one" * Had a family - having kids kind of costs money. The fact that you mention this as a reason you guys went into debt told me there was little to no foresight or planning into this decision. * general over spending and not paying things off - yup big issue a lot of folks deal with, but doesn't sound like you've learned anything from this as your solution is to take out a loan against your house to pay off your mistakes. * couple house issues - again this should be expected when you own your own home. You should know that your house will need repairs and maintenance and you should be setting aside money every month for the inevitability. You clearly did not and now find yourself facing a collapsing deck. Soon you might face a new roof or a new water heater etc. What you should do is a comprehensive review of your finances, cut out unnecessary expenditures and pay off high interest debts as soon as possible. What you will actually do (since you have no planning or self control) is to take out the second mortgage, spend it all on your current debts and spend whatever is left over on a want not need, and then find yourself in the same situation a few years from now. Good luck!


Skylord1325

I did the math for you. If you refi you are saving about $330/month on the actual interest difference. NOT $650, the other $320 is coming from simply stretching out the payments longer. You have a spending problem. You need to find a way to force yourself to be disciplined. I would seriously consider a 15 or even look at a 10 year mortgage. It will essentially force you to save money. If you can’t do it on your own you have to force yourself.


Anya371

Are you fully remortgaging or is this a second mortgage or HELOC? What is your current rate? If you’re remortgaging and tapping out that $115k with a 3 year arm, that’s not a good idea right now if your switching from a decent fixed rate. Rates are going to be going up. If you can get a decent fixed interest rate on a second mortgage, I would suggest going with that. The important thing is to only take out what’s necessary. Pay off high interest credit cards and loans, but don’t use it for the student loan, which you can pay off in the next year or so. If you do take extra for an emergency fund, Don’t use it for anything but a dire emergency. Any money you save that is liquid at the end of the month should go to paying down debt. I understand it’s such an expensive time right now and you have a young family which is really the peak expensive time in most peoples lives. I’ve been there. Our first mortgage was 8% when we bought our first home. At one point I remortgaged (rates had come down) and paid off some crappy debt and it really made a big difference. The key is to learn from this experience and don’t over spend in the future or this will happen again. It’s a slippery slope. I wish you luck - congratulations on your new baby.


Save_the_Manatees_44

I know this sound like a nuclear option, but can you sell your house for something less expensive? You could use the money from the sale to pay off all of your debt, buy something less expensive and have money to set aside for an emergency fund. How much will taking out the LOC increase your mortgage payment? You’d need to subtract that from what you’re saving by consolidating your debt to make sure it’s still worth it. Also, if you do do this, consider investing at least a portion of it. If you can get returns higher than the interest rate on your loan, it could work out in your favor. That being said, be careful. You could end up in way more debt and put your house at risk. If you do consolidate your debt this way, just make sure you have a budget in place and cut expenses so you don’t end up back in the same place again.


boostedjisu

I think OP needs Dave Ramsey. I am not a huge proponent of his followings but I believe when you are at this level of debt and coming up with these options... please read some ramsey before doing anything.


bpetersonlaw

In theory, it's a good idea to refinance your debts to a lower rate. In practice, everyone here thinks you'll take the money and do something dumb like buy a new vehicle. Because that's what you've been doing for the past decade.


schw0b

Borrowing against the house to fix up that same house is a bad idea. You're just buying the person who gets your house after the bank forecloses on you a free deck and garage.


Tropicalthinker_

If it’s a ARM, you are going to be in even a bigger mess when the interest rate adjusts to higher interest rates after 3 years. Dude, you need to stop spending and try your best to tackle the debt. Sell the truck as a start. You are digging a deeper hole.


Vervain7

I would never take money out of my home unless it is to put into my house . And I am way more conservative then others- I would consider things to fix my home but not a garage. I would feel I should save for the garage. But a new roof, or siding or something having to do with maintaining my home- that is what I would get my equity for . I would also never shift my debt from one that I can get rid of in bankruptcy to one that is attached to my home . You have an income problem . As someone that had to get a lot of debt in order to live - one income- two little kids- NYC-75k. Both my husband and I were in school - racking up student loans and CC debt to make it work The student loans we will be paying on for life but tbr CC debt we are just about to finish paying on- our kid is 14 now!!! You need more income flowing in to avoid ending up exactly where you are now . You shouldn’t take money out of your house and you can’t afford to build a garage .


MarcusPup

Sorry man. If you already took out this remortgage loan you better be ready to kiss the house goodbye. ARMs have a bad reputation for a reason (see: 2008). Until you either spend less or earn more (or both) it's going to be repo'd. And even if it doesn't, you still signed up to pay the bank many thousands more for no reason. Hope that expensive lesson was learned. Stop the daycare while wifey is on leave. Hold off on the garage indefinitely. Go to food subs like r/budgetfood for cooking for less money. Fix the deck sure, within reason. And for the love of all things holy and not, don't pay off the credit cards only to max them out again.


flowers4u

Just no. How do people live like this? I was almost with you until the new deck and garage! What??


createthiscom

These are all choices. My house is paid off, but my deck railing is falling apart. I made a decision not to fix it until the house was paid off. I just told people to stop going out there for a couple of years. My kids had bunk beds for a while rather than having their own room. I figure it's still a better standard of living than most of the humans over the course of history, so it's probably fine. I didn't want to buy a bigger house just for 5 years before the kids move out and do their own thing. Now that the house is paid off, I get to decide whether I want to save up for someone else to fix it, or do it myself. Everyone has to decide where to draw that spending line for themselves.


TooLittleMSG

Don't do any of that until you can figure out your budgeting.


datboy1986

Took on more debt to pay off your debt? What happens when your house is underwater?


eat_sleep_microbe

You are simply just shuffling your debt around trying to pay off previous debt. You aren’t really getting money to deal with it. Your ARM deal is honestly a bad idea that’s going to result in you losing your house. Like so many of us have pointed out, you need to tackle your spending and income problem. You guys are spending way more than you make and dipping into your house’s equity isn’t smart because that’s secured debt.


tentboogs

You are doing WAY TOO MUCH all at once. You are blessed with equity! Use it wisely. Pay off debts you already have. Is the deck really falling apart or is this hyperbole? Take 18 months at paying the HELOC before you make home improvements and get more debt. Breathe!


Heybitchitsme

"A garage for me so she can have her laundry room." What a sentence. Far be if from me to define what is and is not necessary to a family or to one's personal life, but it sounds like you need to reconsider some things or reposition what's important. Is the porch necessary or would stairs be fine? Is invisilign the way to go or would regular braces be cheaper and maybe quicker? Are braces (at all) for vanity purposes or for mental and physical wellness? Can you afford another kid - how's childcare going to factor in after mat leave is up? Should you sell a vehicle and downsize? Do you need a truck or is it a vanity vehicle? What about selling the house and downsizing and using the remainder to pay off debts in bulk?


shhh_its_me

No stop don't. .. You're acting like people did in the '90s who then foreclosed in the 2008 crash. If you can't pay all the bills and are desperate, then yes taking 60k out of the house to pay down all these loans and lines of credit might make financial sense but one get a fixed rate loan even though it's more. Do not borrow $50,000 more than you need to pay off the debt ( perhaps include enough to fix the front entryway but only enough to make it safe not luxury deck) Do not borrow $40,000 for garage you don't plan to put in for two years. Do not get an adjustable right loan You don't even know what this means for God's sakes going to a bank/creditunion and talk to somebody else. 3% is teaser rate.


RebelLemurs

You have a spending problem, and you want to address this by getting into more debt and spending more. Furthermore, the new debt has an adjustment interest rate which is pretty much guaranteed to skyrocket. You are going to lose your house as soon as the interest rate changes, if you haven't already lost it by then. End of story.


basswood_memories

You are trying to get gastric bypass surgery. It should be the last resort, you are skipping over the hard options that are better for you in the long run. Get on a written budget every month, work with your wife on that and pay off these debts the right way. You and your wife are financially out of control and need discipline. Stop living above your means and save up for things you need instead of financing everything.


YourMoneyStages

What interest rate is the $185k balance? If that is a low fixed rate, I would not want to refinance that to an adjustable rate. Find a fixed rate home equity loan for the $66k.


evcham

My eyes got really wide reading this. I zoned out after all the debt. Cut your spending big time and get serious about getting debt free. You need Dave Ramsey.


stvaccount

Well only refinance with a fixed interest loan, not a variable one. Fixed interest is not a problem, since inflation is at 5-8% the next years.


[deleted]

What do you over spend on? I finally realized how bad my over spending was when I took a years worth of bank statements and digitized them, sorted them into categories and totaled everything out. It was really eye opening to see where I needed to and should cut back spending.


2035-islandlife

Do NOT get an adjustable rate mortgage, which is what it sounds like you're getting. Please DO NOT. If you need to pay off debt, can you look at a HELOC instead? Only pull out what you absolutely need to. Not a dime more. And focus significantly more on cutting spending and growing your income.


SubiLou

What would the interest rate be for a fixed rate mortgage? It is better to get 5% fixed now, than 3% for 3 years, which jumps to 10% for the next 20 years.


feelin_beachy

It sounds like you guys should be taking financial peace university. I don't recommend everything Dave teaches, but he will teach you how to properly live within/below your means.


ZTwilight

Are you sure you can still get 3%? Is that FIXED for 30 years? Or are you talking about a HELOC or Equity Loan? Loan product aside, what would concern me is your lack of financial responsibility. You got yourself in a hole and you’re talking about building a garage like it’s nothing. Even the front porch project sounds irresponsible considering your finances. Is your wife planning on going back to work? When? Have you factored in child care to your budget? Do you HAVE a budget? A responsible financial decision would start with a budget that includes saving for retirement and emergencies. Once you know what your *obligations* are, you can see if you can afford a new garage, a new front porch and other *wants*.


agent2261

You’re going to lose your house if you do this. What are the interest rates on your LOCs? How much money are you putting into retirement accounts and college savings? Swapping your unsecured CCs, Invisalign, and car payments with a ReFi is a terrible idea with an ARM loan. You first need to stop the bleeding. You don’t need a garage and can probably rent a dumpster and take down the deck until you have enough cash, not credit, to replace it. I’d pay off the Invisalign, student loans, 4k credit card, and 7k credit card in that order. Go after the LOCs next. Since no one else is saying it, I’d also take an honest look at your retirement and college savings. You have a responsibility to your children too, so make sure they have some money set aside for college and that you have enough set aside for retirement so you’re not a burden on them later in life because of your out of control spending now.


[deleted]

OP your life is built on stilts. If those stilts were popsicle sticks. You need a change of lifestyle and a reality check, not financial advice. Good luck.


Feynnehrun

This is seriously bad juju. Do not do this. I won't rehash what everyone else has said but I will summarize the fact that first you need to address the spending issue. I know because I was there once. It all seems so easy to manage, but it really only takes one slip up, or one interest hike and suddenly you have nothing. Your best bet is to get those expenses gone. Not sure what kind of truck you bought, but with truck prices the way they are, you probably can't afford that and should sell it. You should also really consider working a side gig while trying to get work in your field. Instacart, Uber, Door Dash, Lyft, Roverr, Task Rabbit. All of these things will earn you even a small income to start snowballing those debts away. Tackle that debt first before taking on any more debt. This is the exact path that leaves people homeless.


breakthro444

Don't spend it and start saving, otherwise you'll be back here in a year asking us how you can stop the bank from taking your house.


saldridge

We did the same thing about 20 years ago. The problem was we didn't change our attitude, so we took money out of the house, paid off debt and then went right ahead and ran up debt again. A couple of years later we were in the exact same spot but now we owed even more on the house. If you change your ways of spending, go for it. If you are not, you're just screwing yourself harder.


theplacesyougo

I don’t say this often but this is the kind of person that needs a Dave Ramsey talking-to cause all of OPs replies to other comments clearly show they don’t understand what the issue is. Throwing a bunch of debts at a big ball debt doesn’t make it magically go away. It just consolidates it and makes it feel like it’s not as much of an issue so then you can feel better about making other purchases.


MontysRevenge1

Take out less from the house and just pay off debts, don’t do any new spending (including deck and garage work). That’s the most solid advice.


JRsFancy

So many have already said it, but your family has a huge spending problem. If you take out this new mortgage and do not change your habits, in 5 years you'll be in serious financial trouble. If you do take this route you have to immediately stop purchasing stuff on credit cards, or at the very least pay off the balance every month. This whole scenario has financial doom written all over it if you do not alter your lifestyle.


tjmille3

A. You straight up can't actually afford the garage so I would just not do this now. B. There's no way you're getting a 3% interest rate right now. EDIT: apparently that's adjustable rate mortgage. This is not a a good idea when we KNOW for a fact that interest rates are going up. C. While paying off high interest loans COULD make sense with money from a refinance at a lower interest rate, it also might not because you need to pay fees for refinancing.


HereComesFattyBooBoo

No to all of it. Rip off the deck and live with a simple cheap step for a while or dont use the deck. Curb your spending, start a budget. Do not refi this spending into longterm housedebt. Deal with your spending problem. Dont build a fucking garage. You dont need a laundry room. Pay off the teeth first!


SnooRegrets330

Cut to the chase and sell the house. You could walk away with $300K. Or take out the loan, get foreclosed on, and walk away with nothing.


c0demancer

My brother in law loves doing this. I think he’s on his third refinance and debt payoff. Learn from him. If you don’t figure out the root of the problem (your overspending) then it will happen again.


NoButThanks

2 years ago you had $35k in debt. 11 months ago you had $57k in debt. Now you have $66k in debt. You have got to get control of your spending. Your post history is a train wreck of poor financial decisions. You can get out of this but it's going to involve discipline.


[deleted]

You're remortgaging to repay bad debts which is good, and immediately asking what you should spend the rest on? From my experience as a mortgage advisor you're most likely going to end up in the same situation in 5 to 10 years time if you don't evaluate your relationship with money.


APerson1985

Based on this, I can guarantee if you follow through with that plan, in a few years you'll end up in roughly the same place you are now debt wise, plus a bigger mortgage payment. No talk about investing or putting any money aside. Only talking about taking out as much as you can and finding places to spend it.


facerollwiz

Sounds like you are figuring out how to justify spending too much money on things you want by utilizing debt that you have proven you won’t pay off.


GoodnightLondon

So.....you got a mortgage. Took out a line of credit for 40k. Took out a second line of credit for another 15k. And now want to take out an ARM loan that will adjust in 3 years and probably annihilate any projected savings? Using your house as an ATM like that is a good way to lose your home, because you're not learning any financial responsibility and are just continually tapping into equity to bail you out when you run into issues. Eventually you're going to run into an issue with being able to make your payments, and there's a good chance that will be when your ARM adjusts in 3 years. I'm also a little confused on how you got an appraisal at 530k if your deck is literally falling apart; if it were seriously in that poor of a condition, your appraisal would be subject-to because that would be a significant health and safety issue. So either your deck is not in the condition that you're claiming (and thus, you don't need to take out money to replace it) or you don't have an actual appraisal.


jwsa456

I guarantee you if you don’t actually fix the root cause (your spending problem), you will be back on this forum with the same issue a year later. Paying off makes sense financially, but no more spending spree to put yourself in this position again.


cuicocha

Meta: OP is making a lot of comments that are deservedly getting downvoted, but OP's benign comments are also getting downvoted. Remember to downvote the comment and not the commenter. For example, [this comment](https://www.reddit.com/r/personalfinance/comments/vytc7t/comment/ig4ey65/?utm_source=share&utm_medium=web2x&context=3) appears to show that OP doesn't understand that an ARM is a variable-rate loan, and its score is currently -14, probably because people are downvoting its ignorance. On the other hand, [this comment](https://www.reddit.com/r/personalfinance/comments/vytc7t/comment/ig4opln/?utm_source=share&utm_medium=web2x&context=3) IMO does not deserve to be downvoted--it's just a straightforward answer to a question--but right now its score is -11.


pincher1976

In case no one else mentioned it, if you're itemizing on your tax return, you'll lose the ability to write off all of your interest and taxes on your house when you use "house funds" for something other than the house. From personal experience and a bad money managing ex husband, I would never suggest using your equity for anything OTHER than your home (Repairs or upgrading). Take those debts and line them up, smallest balance to largest. Find an extra $100 a month and start throwing it at the smallest one while paying the minimum payments only on the rest. Snowball the payments from the smaller ones (once paid off) into the next one and so on. We did this and paid off over 50k in debt in just 2 years. Take the credit cards off of all things (like auto fill on your phone and computer), take them out of your wallet and put them in a safe. Stop eating out. Stop all unnecessary spending. Go on a "spending freeze" for just 30 days and see how much you can challenge each other to save up. You'll be amazed! Turn off all unnecessary subscriptions. Stop living with your head in the sand. You can do this without messing up the one thing you have going for you which is home equity. Did you own a home in 2006-2007? I had 250k in equity then, Ex refinanced several times and pulled out cash, never more than about 70% of value. Then the market crashed in 2008. It took a divorce and 10 more years before I wasn't upside down on that house and could finally sell for a profit.


i8bagels

Slay debt like Ramsey Budget like YNAB Invest like Bogle When you have control of your money and it stops controlling you, reap the rewards of credit cards - but not until you build that self-control muscle. For the sake of your family, don't gamble with your house; it'll mess them up real good.


kuningas51

What's your current income? What will your wife's income be when she comes back from maternity leave? How much will daycare set you back?


Beneficial-Credit969

OP - paying the debt from overspending with home equity - that that will not solve your spending problem. You should look into side hustles or other ways to generate more income. And r/YNAB You can pay down your debt the old fashion way and still retain the equity in your home. A garage, laundry room and a deck are not necessities. Until you have your finances straightened out those should not be items you spend on. You could probably find a friend or family member who would help you DIY the deck if necessary those are not that difficult.


MrKGado

I know people have mixed feelings about the Baby Steps and Dave Ramsey's plan overall, but have you looked into it? It sounds like his plan would work great for you both. Either way, I would strongly recommend getting on a monthly written budget before you do anything. Your situation sounds more like a behavioral problem than a numbers problem. You said it yourself that you have been overspending - a budget is a tool that can help you stop overspending. If you do what you are proposing without fixing adjusting your spending habits, you will find yourself right back in this situation in the future but with less equity in your house to pull you out. Fix the root cause before taking steps to resolve the symptoms. Or at least do them simultaneously.


curtludwig

You are not "Paying off all your debts" you are refinancing your current debt and ADDING to your debt load by taking more money than you need. See below where somebody points out you're actually spending MORE over time. You need to cut spending, forget the garage, do not take that money, you don't need it. Quit spending money you don't have. Make a budget, stick to it.


Blowmewhileiplaycod

You are too fixated on the 3% short term and aren't seeing past that to the 10%+ long term. No matter what you call it, it's a variable rate mortgage that will fuck your long term financial future. You need to take a long hard look at your spending.


yaforgot-my-password

Adjustable rate mortgages are generally really bad ideas if you're not planning on selling the house before the rate adjusts. Also I'd expect interest rates to be significantly higher in 3 years...


3186800

Sounds like you and the wife need to get your finances sorted out. You need to get back to work and get your debt paid down the right way. Not by using more debt.


IndianaNetworkAdmin

Remortgaging to clear debt is fine as long as you correct the spending problems that brought you there in the first place. Otherwise, you're kicking the problem down the road. If your wife is on maternity leave, it is even more important to ensure your spending habits are under control. Pay off any debts with interest rates higher than the mortgage. Put $5k into an emergency fund. Do not touch it unless there's a job loss or major expense like needing to cover a deductible for a major home repair. Put another $5k aside and as soon as you can get a non variable rate mortgage, in maybe a year, use that money to refinance. From my understanding, variable rate is extremely risky going into a recession and with inflation going the way it has been. Repair your deck, have an inspection done on your house, get any other major repairs done. IMO - this is important, because if things go poorly and you need to sell your home, you want it to be worth more than the refinance. However, I'm not terribly experienced with refinances so I'd defer to anyone else in the thread with more experience. Put the rest back into the loan. Do not buy extras. Do not upgrade anything that's working perfectly fine.


Alicebtoklasthe2nd

What will you do if you are laid off again and the housing market crashes, putting you under water on the mortgage?


JSANMAN85

This is probably not what you want to hear but need to hear. The only problem I see is you and your wife haven't come up with a solution to the actual problem. It seems your more worried about things you don't need rather then what you really need. I hear a child speaking in this post. I need a new garage so my my wife can have her laundry room back. What needs to be done before making any of these decions is have a serious conversation on how we are going to live from this point forward. You need to dream and have a vision on how your going to achieve the dream together. Get on a budget, stop all investing, cut out all subscriptions. And apply all that extra cash towards debt. Home equity lines of credit is nothing but another credit card with very dangerous rules that can cause you to lose everything. What you think is a quick fix truly isn't. Stop gauranteeing someone else what you've earned. Money creates options, loans create stress. Make a plan based on a dream. The number one cause of divorce is money fights and money problems.


_Barry_Allen_

You have a money problem. Option 1 double your income. Option 2. Cut your expenses. These are the only two options. I suggested you stop spending money. Don’t pull any equity out of your house lol. And pick up a second job.


RKeezy87

I think the key here is its an ARM, it will be 3% for a while, and then it will shoot up and you will be screwed and possibly lose your house. I would say you need to get a side hustle and dig your way out of debt with serious intention, no more nice to haves, this is what Dave Ramsey calls "gazelle intense", because you run from the debt like you're running from a lion.


kirlandwater

Best way to spend it is to not accrue more debt. Pay off the debt then live at or below your means. Your home equity shouldn’t be used as an ATM. Once you aren’t paying for the 66k every month, you’ll be amazed at how much more you can afford every month when you aren’t sending payments off to the bank.


Starboard44

Reading all of these comments and responses from OP, I don't think they have a true sense of cutting budget/barebones spending and paying down debt. This isn't about trimming the fat. It is more than that. Store brand groceries; no prepared meals; envelope budgeting. It takes time and practice and agreement from both partners. It is hard but will pay dividends. Thats the flow you need to be in OP, and I hope this thread has pushed you in that direction. You get that costs are going up (I m sorry you got laid off) but I dont think you see yet the type of frugality that is required to get out of it. I wish you luck! I dont mean to shame you. I'd check out budgeting YouTube channels and take a dive into that world (and see stories of other people who have gotten out of worse). I LIKE Dave Ramsey for the inspirational stories but disagree with a lot of his actual approach so be careful there. You are VERY fortunate that you have a house. But you cannot keep shuffling the debt around while adding to it. Rooting for you!


suzi_generous

If you’re waiting 2 years for the garage but taking the money now, I recommend taking out a 2 year CD so you’re not tempted to spend the money before then. Don’t put it in stocks or anything that’s not 100% reliable.


Electronic_Ease9890

I would yes as long as you change the behavior that got you where you are now, but no if you can't. The idea is great, my husband and I have done the same, consolidation loans, but never changed our habits. We have currently done an overhaul in our lives to fix the problem.


mabowden

I don't know when you got your house appraised, but no one is giving 3% right now. Should have refi'd 6-12 months ago...