Pay off credit cards, or downpayment on a home?

[Ilmater]

I have $15k in cash right now, and just barely over $15k in credit card debt.

$8k @ 19%
$5k @ 13.25%
$2k @ 11%

But I'm also in the market for a house. And, I'm thinking that if I have a house, I'll have equity to get a loan and decrease those interest rates.

So, does anyone know how much better my rates could get on those loans, vs. what benefit I get from putting a downpayment on the house?

 

[Dacalo]

Pay off those credit cards.

 

[Aquaman]

Originally posted by: Dacalo
Pay off those credit cards.

 

[MixMasterTang]

Originally posted by: Dacalo
Pay off those credit cards.

I second the motion. You would be insane not to pay off at least the high interest cards. It could help improve your credit score a good deal too and let you get a better rate on a home loan.

 

[MikeyIs4Dcats]

I hate to say it, but you're an idiot. Why would you keep accumulating finance charges that high when you have the cash?? PAY THEM OFF NOW!

and you do realize you have to HAVE equity to get an HEL...

 

[sdifox]

If you have to ask this question, don't buy a house.

 

[Sphexi]

Originally posted by: Aquaman

Originally posted by: Dacalo
Pay off those credit cards.

Real estate market doesn't really have anywhere to go but down, by the time you got that $15k again chances are prices will have dropped a bit.

 

[FoBoT]

that is quite a bit of unsecured debt
i would work on that some before committing to a mortgage

 

[KoolAidKid]

Figure out how much your closing costs would be for a house in your price range. Keep that amount in savings, use the rest to pay off your cards, starting with the highest interest rate. Shop for an 80/20 loan when you buy a house.

 

[dainthomas]

If the choice is between:

1. pay off credit cards
2. buy (x)

Always choose 1. Especially in this case, because saving for a down payment is usually a losing strategy even WITHOUT credit cards.

 

[SoulAssassin]

Have you tried applying for any 0% cards?

http://app-o-rama.com/

 

[iroast]

CC debt is bad. Pay it off ASAP.

 

[Ilmater]

Originally posted by: dainthomas
If the choice is between:

1. pay off credit cards
2. buy (x)

Always choose 1. Especially in this case, because saving for a down payment is usually a losing strategy even WITHOUT credit cards.

I'm not "saving" for a downpayment. My grandmother died, and I got $15k from it.

Also, I'm not buying "x", I'm buying a house and investing my money vs. dumping it into an apartment.

 

[xanis]

Pay of the credit cards and build some good credit. The good credit will help you get a new home down the road.

 

[Ilmater]

Originally posted by: SoulAssassin
Have you tried applying for any 0% cards?

http://app-o-rama.com/

That's where the small remainder of my just over $15k debt will go.

Edit: I've tried that before, and I get limits of like $1,500 with rates that are much too high later.

 

[MixMasterTang]

Originally posted by: SoulAssassin
Have you tried applying for any 0% cards?

http://app-o-rama.com/

If he goes on an app-o-rama chances are he won't qualify for a mortgage loan for at least 6 months.

 

[austin316]

Originally posted by: MikeyIs4Dcats
I hate to say it, but you're an idiot. Why would you keep accumulating finance charges that high when you have the cash?? PAY THEM OFF NOW!

and you do realize you have to HAVE equity to get an HEL...

I second that. What you have done by SAVING money is actually LOSE money. Run, don't walk, to the nearest bookstore or Amazon.com and order a financial help book. Suze Orman makes some good ones.

On your $15,000, you probably paid like $3,000 in interest last year alone.

 

[LS20]

you may need to call those daytime-tv 1-800-debt-help phone lines

 

[austin316]

Originally posted by: dainthomas
If the choice is between:

1. pay off credit cards
2. buy (x)

Always choose 1. Especially in this case, because saving for a down payment is usually a losing strategy even WITHOUT credit cards.

Yep. THE ONLY time you wouldn't is if you have a low low low APR on your CC and a similar investment could net you more money, but that won't happen.

Back to your original question, if you feel a home can earn you more than 19% a year, then you SHOULDN'T pay off the credit cards. but note, at 19% a year, that is basically saying that every 4 years, the cost of your home will double.

 

[SoulAssassin]

Originally posted by: MixMasterTang

Originally posted by: SoulAssassin
Have you tried applying for any 0% cards?

http://app-o-rama.com/

If he goes on an app-o-rama chances are he won't qualify for a mortgage loan for at least 6 months.

He might not necessarily need to go on a true AOR, I provided the link just to show him some current 0% offers. All he really needs is 15K in available credit in the least # of cards possible which, depending on OP's history, could be as little as one. But, generally speaking, you are right. Excessive credit inquiries shortly before a mortgage application could set off some flags and affect his ability to get approved for the mortgage.

 

[pontifex]

are yuo crazy? pay off those cards!

 

[SOONER]

Pay off the cards. Then don't buy anything you cant pay for in cash. Take the monthly payment you had been paying on the cards and save it till you have the cash for house downpayment. Shouldnt take you too long. This way you will go into home ownership without debt hanging over you.

 

[PricklyPete]

Originally posted by: Ilmater

Originally posted by: dainthomas
If the choice is between:

1. pay off credit cards
2. buy (x)

Always choose 1. Especially in this case, because saving for a down payment is usually a losing strategy even WITHOUT credit cards.

I'm not "saving" for a downpayment. My grandmother died, and I got $15k from it.

Also, I'm not buying "x", I'm buying a house and investing my money vs. dumping it into an apartment.

If you have that much debt...what makes you think you'll be able to ward off going into further debt when you have all the house related costs affecting you (they always end up being more than you think).

 

[skrilla]

Originally posted by: Ilmater

Originally posted by: dainthomas
If the choice is between:

1. pay off credit cards
2. buy (x)

Always choose 1. Especially in this case, because saving for a down payment is usually a losing strategy even WITHOUT credit cards.

I'm not "saving" for a downpayment. My grandmother died, and I got $15k from it.

Also, I'm not buying "x", I'm buying a house and investing my money vs. dumping it into an apartment.

It doesn't matter. The answer is still 1.

 

[Ilmater]

Originally posted by: PricklyPete
If you have that much debt...what makes you think you'll be able to ward off going into further debt when you have all the house related costs affecting you (they always end up being more than you think).

I'm getting engaged soon (gf is very frugal), and that debt actually is much lower than it was a few years back.