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At Breaking Point...Which Path?

Posted by dmissy (My Page) on
Thu, Aug 16, 07 at 18:46

Have mortgage, home equity line, and just 2 maxed credit cards...now what? Don't want house refinanced for two credit cards, but so close to limit, fees and charges are killing me. I had a 3-week layoff...and was penny for penny. Previously, had very good credit..no lates..I posted before to gain second job...no luck yet. I hate my primary job....grueling and stressful.

I need to get these credit cards outta the way...what would you do? Next year, can tap into 401K..was locked in for 5 years. I don't want closing costs...associated with refi. That installment loan is only 2 years out.

Need some breathing room quickly. Personal loan would be high interest...trying to get away from.

Got one house payment deferred til Sept....any advice would be appreciated.

Yes, alone.


Follow-Up Postings:

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RE: At Breaking Point...Which Path?

dmissy,
I've been there. I was a single mom and went through several strikes at a time when I was living from paycheck to paycheck.

Try, try NOT to refi the house to pay off the CC's. Can you find a CC with a lower interest rate to move them to?

I know from your previous post that you enjoy your privacy, but can you find a roomate to share costs until you work your way through this? I know (also from prev posts) how important your home is to you.

Also, consider your 401K an absolute last resort - that is your future security.

Sending you hugs and warm thoughts
Z8 g'ma


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RE: At Breaking Point...Which Path?

I've never "been" where you are now.

Why are your credit cards maxed out?! (Not wanting to be a "jerk", but what are you using them for?).

Do you have a room-mate in your home? Why not? We retired out mortgage in about 7 yrs. by having a "room-mate" pay the mortgage AND 1/2 the utilities. With the exception of 1 of 5, all have remained very dear friends.

As much as you hate your primary job you have no choice but to SUCK IT UP and keep showing up and doing a good job. Accept that! sometimes the grim reality of our circumstances dictates that we must "suffer" until we figure out a way to change our circumstances.

I say, "room-mate"!!!


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RE: At Breaking Point...Which Path?

Sell off what you can to bring in some money... even the house if possible.


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RE: At Breaking Point...Which Path?

Definitely don't touch your 401(k). In addition to ransoming your future security, you will end up with only about one-half of the money you take out. The rest will be lost to early-withdrawal penalties and income taxes (unless you're of the age at which you can withdraw from it without penalties; doesn't sound like you are).


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RE: At Breaking Point...Which Path?

In other words, you can't afford the house. Get rid of it unless you owe more than it's worth. Walking away will kill your credit worse than late payments. You can try to renegotiate loan terms, assuming you can identify the lender. This is what is contributing to the subprime mess, quite a lot of the mortgages were sold to investors in pkgs that create little interest in renegotiating loans; they do better just foreclosing and selling at a loss (tax advantages).

I second the advice to NOT touch your 401k. We did it to try to avoid bankruptcy and it was the hands-down dumbest thing I did. I could have kept the 401k intact in bankruptcy instead of losing 50% to taxes and the rest to try to keep us going in a losing situation.

At this point, if anything goes wrong with your house, it doesn't sound like you can afford to fix it. So the house goes downhill right along with its value. The overall RE market is not going to stabilize for another year or so until the new house inventory works through the system, although of course YMMV depending on where you live.

If you can rent cheaper than you can buy, it's your best recourse to sell the house and get yourself back on a solid financial footing. I have friends who have always been renters; now that they've entered retirement they bought a double-wide in a nicely maintained park near the fishing lakes they prefer. They don't have to care about "resale values", it's just a place to live and enjoy until they go into a nursing or retirement home of some sort. They ended up saving the same amount of money as we can count in our home equity profit - and in fact, considering maintenance, utilities, etc., that we have paid out through the years, our friends have probably come out AHEAD of us in actual dollar figures.


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RE: At Breaking Point...Which Path?

I think it's time for a bare bones budget. (and no, it isn't a curse word.) I don't think that buying more debt is the way to get out of this bit of trouble.

If you take out of your 401k, you will lose that security for the future.
If you refi, due to the recent history of late payments, your interest rate will go up, your monthly payment will go up and if anything like this happens again.... you will lose the house. Not to mention the fees associated with that route.
If you take a personal loan, they may want some kind of collateral. The interest will likely be less than the CC, because you have just secured, non-secured debt. But there is the possibility that you will lose your collateral if you fail to pay.

Here are my suggestions....

Write down your budget. NUMBER ONE MOST IMPORTANT. You can't work with what you have if you don't know where it's going.

Get rid of cable, internet, and cell phones until you can afford them again.
Find someone to carpool with. Even if you meet at another location.
See if there is anything else you can cut from your budget. Or at least cut down.
Tell the family that lives long distance that they will have to call you. Or re-start that age old tradition of writing letters.
If you have after school time off, look for those that need after school care. It may not be enough to fix the problem, but it may be enough to fill a few gaps.
Make you Christmas gifts now.... I don't think this will be "fixed" by the time the Christmas Crazies hit, and you will already be prepared. If you don't know how, you have time to learn.
Talk to the supervisor at the CC companies. Explain your situation and see if they can do anything to help. The customer service reps that answer the phones may not have the power to do anything to help you. Your situation is different. You need to talk to a supervisor. (see if they will raise your limit so that you're not paying over limit fees, they may be able to lower your interest rate, or forgive the current late fees...) These companies want paid, and if they see that you are trying to pay, they will work with you to make it possible. The alternative is that they get nothing, or have to spend money going to court, then possibly waiting until your house sells before getting paid back.
Talk to your mortgage company, see if they will defer that payment (the one deferred to Sept) to the end of the loan. Yes, it will cost you the interest, but it may save the house. And it would not leave you a payment behind. If not, then ask if you could break that payment down into several payments that would accompany your usual payment. For example if your payment is $500, for the next few months you would pay $650, until that payment is caught up. (If this is something you can do.)
Look into that roommate situation. Ask the lady who asked you if she's still interested. She may be thinking that YOU are not interested.

Food is the budget item (other than Misc, which will be $0 until you get this fixed) that is most easily manipulated. Food co-ops, sales, organizations like Angel... something (sorry, I can't remember the name right now), that buy in bulk and then sell at a reduced rate, churches, etc... can help with this item if needed. Take your lunch to work. Make your food instead of buying prepackaged. You can put soup in the crock pot in the morning, and it'll be ready by the time you get home. You can make a large batch and have it for lunch the next day, or freeze it and have dinner on another day. If you have to, you can eat the same thing for several days. It may not be fun, but it will help with the budget. It costs less to make a big meal than several little ones. Buy a travel cup, and don't stop for coffee in the morning.... fill it up at home. Have a "pot luck" and invite your friends over to your house, instead of going out.

First thing though is to write out your budget. Before you call the companies, you have to know what you can afford to pay each month. You do NOT want to make a plan with those companies and then have to default on them. You really, really, REALLY need to know what you can comfortably pay, BEFORE you call. Most places are willing to work with you and give you a hand, UNLESS they extend you that hand, and then you default on your agreement with them. I can not stress that enough. Know what you can spend, before you agree to something that you can't afford.

Although it's unpopular, and somehow the phrase "I can't afford that right now" has become something to be embarrassed about instead of just a statement of fact, you should get used to saying it. There's nothing embarrassing about paying your own bills.... about living within your means. It's much more embarrassing to be kicked out of your house because you can't afford your payments.

IF you have already done all of these things, you can't cut anything else out of your budget, and still can't make ends meet, then I'm afraid that jkom is right, and your only recourse would be to put the house up for sale. If this is not a temporary situation, then that would be the way to go.


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RE: At Breaking Point...Which Path?

If you can still bring in that room mate, I'd do it asap.

You were asking for second job suggestions a while back. I have another one. Check with the nursing homes in your area to see if there are positions available. You could also put out the word that you're available as an adult sitter (there may be a better term for this)for a caregiver who needs a few hours of break time away from a homebound parent or other family member.


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