My home is almost paid for. Should I take out a second mortgage to pay off all my debt — credit card, car loan, school loan?
A – ABSOLUTELY NOT! As I said in the Introduction, bankruptcy can happen to anyone at anytime. Being smart, or a good money manager, doesn’t give you immunity from financial devastation. Credit cards and school loans are unsecured debt. If you take a loan (second mortgage loan) against your home to pay off that unsecured debt you are exchanging it for secured debt. If you have a financial reversal and get behind on your credit card or school loan, the worst thing that can happen to you is they sue you and get a judgment. If you pay off that unsecured debt by taking a loan against your home and get behind on your new second mortgage payments, you will be facing a foreclosure and could lose your home. There is no tax advantage or interest rate savings that can justify putting your home at risk. If you purchase a car, let it stand on its own. It is better to have a car repossessed than have your home foreclosed on.
