I make ~$250k/year. I have about $24,000 in credit card debt, which I could pay off today with money from savings. Additionally, I have a home improvement/remodeling project underway that will total about $65,000. I have ~$100k of equity in my home. My question is: Should I payoff the credit card debt today and get a “home equity/improvement” loan or should I continue to make payments on the credit cards at $100-200 more than the minimum and pay the remodeling costs out of pocket via salary, work bonuses and stock liquidation sources between now and the end of the year.
A home equity line will almost certainly provide you with a lower interest rate and monthly payment than credit cards that are past their promotional period. On the other hand, a home equity line is attached to your home so if you run into financial trouble, defaulting on this debt can have serious consequences. Many home equity lines also have a draw period of ten years followed by a repayment period where the payments increase. In large part the decision comes down to how your budget looks and how easily you would be able to manage the home equity line payments.
The other factor to consider is the origination fees. There are many debt calculators online (bankrate.com for instance) that can help you figure out your likely savings from paying off the credit cards to weigh against the fees from originating a new loan.
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