If you have other debts, such as credit card debts, should you borrow against the increased value of your house in Cambridge to repay your debts?
The answer depends on the equity in your house, and the amount of your debts.
If you own a house in Cambridge worth $200,000, and have sufficient income, you would typically qualify for a conventional mortgage of 75% of the value of the house, or $150,000. If you currently have a $120,000 mortgage, it is therefore possible that you could borrow an additional $30,000 against your house, either as a second mortgage or as a line of credit secured by your house.
If you have $30,000 in credit card and other debts, this approach may make sense. You borrow against your house at relatively low mortgage interest rates, and use the money to repay your high interest credit card debts. Of course, if you have $60,000 in debts, this approach won't work.
In my next blog entry I will discuss whether or not you lose your house if you go bankrupt in Cambridge.
My conclusion: if you can re-finance and repay all of your debts, and still afford your now increased mortgage payments, a second mortgage is a good bankruptcy alternative. However, if your debts are too high, a consumer proposal may be an option.
Feel free to e-mail a question and we will help you review your options.
posted by J. Douglas Hoyes, CA, Trustee @ 8:27 AM
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