Credit Card Debt Issues in Boca Raton, FL
Boca Raton Real Estate
Many home owners have taken what seems like the smart financial move of pulling equity from their homes to pay off heavy credit card debt. They still have the debt, but they're paying it off at a lower interest rate, and the interest now counts as part of the Boca Raton Florida home-mortgage tax deduction.
"Let's clean up the old balance sheet and start over -- that's the poster child to use a home equity loan," Jarrell said.
He warned, though, that you need to take a good look in the mirror before approaching that loan officer.
Many people don't take the last step -- cutting up the credit card. If you can't do that, Jarrell says, all it amounts to is "rearranging deck chairs on the Titanic."
Worse, shifting credit card balances turns unsecured credit card debt into secured debt -- if you can't make the larger payments, then you're in danger of losing your home.
"Let's say you are in a financially precarious position. Don't postpone the inevitable with a cash-out," said Jay Brinkman, vice president of research and economics at the Mortgage Bankers Association in Washington. He says he's seeing more people pay off credit card debt with cash-out proceeds, just to run the bills back up again.
If you've suffered a layoff, taken a pay cut or run into some heavy bills, Brinkman says, at some point there may be only one solution: "Sell the house, take the equity out and reduce your standard of living."
Lonski of Moody's agrees and points to some disturbing data trends.
Two years ago, at the end of third quarter of 2000, personal income growth stood at 8.7 percent, while mortgage debt was growing by a similar 8.2 percent. By the third quarter of 2002, personal income growth had fallen to 3.3 percent, while mortgage debt had roared to an 11.2-percent growth rate.
"These people may have more difficulty in making good on the money they owe, especially if they've increased their indebtedness to sustain a lifestyle they became accustomed to when they had a better job," Lonski said.
The meteoric rise comes on the heels of a slowing in home price appreciation.
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