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Subject:  Re: New here! Have questions! Date:  5/6/2013  11:16 AM
Author:  aj485 Number:  306968 of 312155

I owe about 55% of my home's value, currently. So I can borrow 30k and still be under the 80% LTV.

Are you planning on refinancing your first mortgage, or taking out a HELOC to access the equity?

With a cash-out refi of a first mortgage, you will pay a higher rate than you would otherwise pay, increasing the payment and interest paid to more than it otherwise would have been when borrowing that amount. Additionally, by refinancing, you will be adding time to when you will actually have your home paid off.

HELOCs are generally adjustable rate, which has the possibility to increase both the interest rate and payment, sometimes without any caps. Some HELOCs have an option to fix the rate, but it's generally at a higher rate than a first mortgage, again, costing more.

Additionally, taking cash out of your equity can have impacts on the deductibility of the interest you pay, making some of it ineligible to be deducted, so you need to check with your tax advisor on that. Depending on your state's laws, there can be other impacts due to taking a cash out mortgage.

BTW this is contrary to the advice of my loan officer at our credit union, who advised I should keep a small balance on each card, 10-15% of the limit. Confusing. Why zero, vs. a small amount?

Either you misunderstood the loan officer, or the loan officer doesn't understand how credit card activity is reported to the credit bureaus for use in credit scoring.

There is no need to CARRY a balance from month to month (paying interest) in order to have an account balance reported to the credit bureaus and show the card is being used. Most card issuers report the balance that is on your statement each month, or sometimes once each quarter. There are some credit card issuers that report based on other criteria, like the highest balance that occurred each month or the balance on a specific date each month. You may want to check with the card issuer to see how they report to the credit bureaus.

Once the activity is reported, there is no need to continue to carry the balance - paying it off in a timely manner will not affect what was reported.

The one card that is close to max will be paid down, if not off, on thursday. I use it a lot for online purchases. It isn't always close to max.

In order to have the highest credit score possible, you should not use more than the 10% - 15% of the available credit on card that your loan officer mentioned. You may want to make multiple payments during the month in order to keep the balance down to that 10% - 15% level. Coming close to maxing out a credit card generally has a negative impact on your credit score, which is contrary to what you said you are trying to accomplish. Another way to manage this would be to just not charge more than the 10% - 15% per month.

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