If you were able to pay off "a large chunk" of your debt in 5 months, why are you thinking of mortgaging your home to pay off the rest? Just keep going and knock the rest as long as we aren't talking about hundreds of thousands.

I'm sure the interest difference looks tempting, but you would be putting your house on the line. If the cost of an appraisal was enough to make you unable to pay your bills and wreck your credit, I assume you don't have much/any emergency fund. If not, that should be the #1 priority. Just pay the minimums on your debts until you can build up an emergency fund. Once you've done that, but 100% effort into knocking out the rest of the debt.

Bill,
Thanks for your thoughts. And normally I would agree with you, but we have no emergency fund, and do not have any extra cash to build one up with. We borrowed money from my in-laws to pay off a good chunk of our debt, my wife's idea, not mine. I hate borrowing money from family. But that still wasn't enough to give us some extra cash each month. In fact we still are not able to meet all minimum payments. So, it is the medical bills that are getting left behind now. This time of year, it is our gas bill that is going to kill us. It was already $150 for the month of Nov, here in central Nebraska, with the temp set at 68.

We live in a small town, and house values are not much, so our house only appraised for $21,000. I would like to get 16-17k out of our house, that will take care of most of the 22K in revolving debt, and come income tax time, I should be able to take care of the rest. We have 3 kids, and our estimated refund is pretty good.

Our auto payment is about $410 a month, and a few years ago, that was no problem. We have even looked in to getting a cheaper car for now, but we would be trading so far upside down on this one, that would not help any. And even if we were to do a private sale, we couldn't sell it for enough to pay off the loan.

So, I know we can make it through without taking cash out on our house, but if we did so, it would free up about 300 a month in cash, which would cover the medical bill payments, and leave a little extra to start an emergency fund.

No cell phones, basic TV, land line, and internet, so no extra expenses that can be cut out. We already did that a few months ago.

I am on disability for being blind, and my wife is a teacher, so that does not add up to much at all.

So, I think for our situation a loan on the house is the way to go.

Thanks,
Michael

You have a $21k house but a $410/month car payment?????? Yikes!

A mortgage broker isn't going to be much help to you. There is virtually no market for 16k mortgages. If you have a local, small-town bank or credit union, I would go talk to them about an equity line on the house. However, I would still not recommend moving around debt that way. Right now, if you can't pay a medical bill, you might get a nasty phone call and a ding on your credit report. If you don't pay a mortgage, you'll be out on the street.

Taxes: It kills me when people do what you are doing. If you are going to get a 5k refund, your wife needs to change her deductions ASAP. You have bills you can't pay but are letting the Federal Government hold your money for free for 12 months! 5k/yr = $416/month. Just changing that one thing would dramatically change your life. That will help your cash flow more than a home loan.

Car: "And even if we were to do a private sale, we couldn't sell it for enough to pay off the loan. " So?? Sell the thing and get a clunker. Even if you can't get 100% out from under the loan, you probably can get out from under most of it. Maybe you end up with a personal loan for $100/month and a new car loan of $200/month. You still free up $110.

Before you do anything, you really need to go see a credit counselor. The link below will help you find a no cost one in your area. They can help you work through the numbers and see what you options are.

Here is a link that might be useful: NFCC

Bill,
Thanks for the comments.

Yeah, seems kind of weird, at one point our van was worth more then our house. But looking at old tax records, house values have really dropped here, while farm land has gone up. Not sure what the deal is, but not much I can do about it. Our house has dropped by almost half in the last 4 years. I think that is in part to a lot of houses are sold by auction around here, and things normally do not sell for as much then.

When we got the van, a few years back, we lived in a better house, in a different town, and my wife was making more money, and the government was giving annual raises on SSDI, not that I like using it, but finding a job is next to impossible.`

I agree on the taxes, I like to have it $100 or so either way. This year she have filed exempt, so there are no Federal taxes coming out. The bulk of our refund is from the EITC, which is part of the reason the country is in so much debt, but I don't think they will let us just give it back and say no, sorry put it towards the national debt. Her school does not do advances on the EITC, but yeah, that would really help.

Your thought on the car loan is a good one, but if we can't get a home equity line through our bank, I doubt we could get a personal loan. Seems that would have the potential of putting us in a worse situation as well, if things didn't work out just right.

If we could get 16,800 on the house, which is 80% LTV, I could free up $575 in monthly payments. At 15 years 7% that would be a payment of 151.00 a month for a cash savings of $424.00 per month. I could actually pay off about $625 worth of monthly payments if I paid off a few medical bills that are not charging interest, for a savings of $474 a month. If I put $100 towards an emergency fund, $74 towards the food budget, because ramen noodles get old after 3-4 times a week, and the rest to the remaining revolving accounts, they would be paid off in no time. Then in 3-4 months when we get our tax refund, I could pay off about another $200 worth of monthly payments. So, in less than a year, we would be revolving debt free, with no need to increase that again. Then I would start paying off the installment loans starting with the highest interest, which would be our van. After the van was done, I would add $200 to the emergency fund account, instead of the $100, and put the remaining $600 to student loans and such. Of course, some of the cash saved each month would need to go to heating bills for the winter, but I still think, in a year or year and a half we would be revolving debt free.

So, I have done some thinking and figuring on this, it is not like I decided, "hey, lets borrow against the house to make ourselves go in to more debt". For our situation, it is what seems to work the best for now. I have discussed things with a credit counseling agency, but they can't really reduce my monthly payments by enough to make it worth it. They can't do anything about student loans, auto payments, or the medical bills. On the revolving accounts they could save us about $100 a month. But, if I ended up with a high heating bill, I have to decide between paying the heat, and paying the CCA to keep the contract good with them. At least this way I have more control over our cash. Not that I have done the best job lately, but I do have a plan to fix it.

Michael

"I have discussed things with a credit counseling agency, but they can't really reduce my monthly payments by enough to make it worth it. "

No, no, no!!! Not one of those scam companies. Those are all ripoffs. I'm talking about real credit counselors certified by NFCC. You don't make payments to them or other such nonsense. They just help you wring the most out of your budget and help get you back on the right track.

Bill,
I was not talking about one of those scam companies either. I was talking about the "Debt management Plan", that NFCC counselors offer. They negotiate for lower interest rates and fees, and you pay them, lets say $700 a month, and the counseling agency divides the payments up to the different creditors. If you miss a payment, they can take you off the plan, and creditors can start charging you the normal interest rates and fees and such. They are suppose to be able to help you pay off your debt faster because you pay them the same each month, and as one is paid off, they add that to the next debt, and so on. So it is really no different then what I have planned. They can supposedly get interest rates and stuff adjusted to make the payments less each month. But, as I said, this type of plan won't assist all that much.

But, back to the original question of a mortgage broker that could possibly find a loan for us>

Thanks,
Michael

Michael,
Although our firm originates in Nebraska (I was actually working with a client there today,) our clearing agreements restrict our minimum loan amounts to $100,000... so I couldn't directly offer you help in this case.

You are most likely to get the best mortgage for your lower balance at a credit union, if you have access to one... and otherwise, I'd simply suggest the yellow pages (or Google) for retail or broker loan officers.

I do send you luck!
Dave Donhoff
Leverage Planner

"But, back to the original question of a mortgage broker that could possibly find a loan for us>"

I don't know of any broker who would help with a 16k loan. As I said earlier, and dave reiterated, your best bet is someone small and local - like a credit union of or local bank. None of the big guys are going to mess with a tradional 30 year loan for an amount this small.