Getting Some Relief…

I am in the process of refinancing my condo for 30-years at 5.875%. I started the process almost a month ago and I have been wavering every since but once my mortgage escrow increased $100 anyway due to higher property taxes, I decided it was the best move.

With the escrow adjustment, my mortgage payment went from $875 to $975. My mortgage will just increase slightly more to $1,045 with the refinance. I am closing the loan on Monday. My condo appraised at $165,000 and I am doing a 75% LTV refinance at $123,750 which will pay off my current $96k mortgage and provide me with roughly $24k to pay off my credit card balance in full by month end. I don't have any plans of relocating or selling my place anytime in the near future.

My student loans begin repayment in January, April and June 2009. It will be the first time in almost 12 years that I don't have credit card debt and God willing, it will be the last time. With the refinance, I will still have roughly $40k in equity in my home and a few months to save an emergency fund before my student loan payments begin.

While some may ask, what are you doing? A portion of my student loan and credit card debt went to pay off a $25k HELOC which at the time had a variable rate of over 10%. The HELOC was the result of an 80/20 home purchase that required no money down in 2003. The truth. I purchased a home that I couldn’t afford at the time and I did not have sufficient reserves. The HELOC was at a low 4% variable rate but once the Fed started increasing rates, the payment on the HELOC became too high. So, I refinanced the balance onto student loans that weren't in repayment and my credit card at a lower fixed 3.99% rate.

I am in a little better spot than most people today in that my property value increased from $129k to $165k, I have a decent paying $67k job and I have excellent credit.

With the refinance, I will be able to start paying on my student loans that are currently capitalizing at least $900 in unpaid interest per month onto my student loan balance. I have a complicated situation but all hope is not lost. It is going to require a lot of discipline and I will also have some reserves soon.

Please keep me in your thoughts. Thanks a lot!