OK so since it’s a home equity loan (and not home equity line of credit (HELOC), I’m assuming this is for a fixed amount (adding up all the $ you owe, plus your mortgage) at a FIXED rate. If it’s a HELOC, the interest rate can usually vary, especially if it’s open ended (where you have the option choose when and how often to borrow against equity). Either way, BEWARE and read EVERYTHING, like three times.
“Embrace” Home Loans? Yeah, more like embrace your lawyer 'cause you and him are gonna be real tight… :lol
Anyways, I’ve had a relative and couple of close friends burned by a home equity loan, but in these cases the fine print is really what killed it, as the interest rate crept up and things got out of control quickly. You don’t mention what the actual rate is, but I assume it’s somewhere better than those credit cards and maybe slightly better (or maybe worse) than your car payment rate. This is kind of beside the point but I’ll throw it out there.
The way it sounds, your outstanding debts right now are unsecured, meaning that the bank is kind of lending you money in good faith with no collateral attached to the debts. I’m referring to your car payment, your credit cards, school loan, etc.
When you take out equity against your own home, you turn that equity (and therefore part of your home) into collateral, turning this unsecured debt into secured debt. For me personally this kills it right there, because should you default on any payments, now this lender can go after you for the collateral (your home).
For the next part, don’t take this the wrong way as it’s just an opinion and none of my business really, but you put it out there so here goes…
If you do not have an extremely stable job and don’t have at least an “emergency” fund worth a couple months living expenses, it sounds like a risky proposition to me.
As for the other stuff I highlighted above (lower half really), it sounds to me like you don’t have tremendous discipline financially, especially if you have credit cards at high interest rates with balances on them and have to pay back taxes on “money on the side”.
I am going out on a limb here and assuming you don’t have a lot of $ put aside for an eventual emergency because if you do, why is it not being used to pay off the other debts at relatively high rates? (You don’t have to explain, this is just me thinking out loud)
The way this is written it sounds like you’re tricking yourself into thinking you are “saving” $600 per year with this home equity / consolidation deal but the truth is you have certain wants (who doesn’t?), but are describing a nice garage and extra tools as a need, and then thinking this will help you better “afford” them?
You NEVER save money by spending money.
I would vote totally against buying these niceties and for not turning unsecured debt into secured (where your home becomes collateral), primarily for the reasons mentioned above, not to mention your spouse is against it. My opinion is, borrowing against your home equity is something to be done only when it’s a total emergency and/or you are doing it for future financial gain (i.e. you already maxed out student loans but are borrowing money for another degree that will help you earn more in the future)
Again, you put it out there so I’m going to comment, but are these things really worth arguing with your wife about at the end of the day? That’s on you to decide I guess…
You’ve done a good thing keeping your payments up to date and stepping up and buying a house and all that… I would just hate to see a bunch of ill $hit happen just because of some mail solicitation and a desire for a a garage, and some fancy tools.