Q: I just purchased my first home in a nice, quiet neighborhood. It is a very modest home with a picture-perfect white fence. I paid $125,000 for the home.
How long do you have to live in a home, or how much do you have to pay on the mortgage, in order to qualify for a refinance? Now that I moved in, and the bills and repairs are milking my checking account, I am scared I won’t be able to stay above water. — G.P., via email
A: There is no magic time period. If the home goes up in value, then it’s possible to refinance. Generally, it’s going to be a couple of years before anyone will seriously consider you for refinancing, assuming the value of the home has increased.
What I am concerned about is your worry that you won’t be able to stay above water on your mortgage, which means you paid more than you could afford. That’s the simple reality.
Let me suggest that you might consider getting a part-time job. Even if you have to work for minimum wage in a hamburger joint for 25 hours a week, at $8 an hour, that is $200 a week. I am certain that money, even after taxes, would go a long way toward taking the pressure off. You won’t have as much time to enjoy the home, but you will be certain you won’t be losing it.
Q: Is it better to close a credit card account or just simply cut up the card and forget about it? I don’t use it, so why bother having it? I think I read before that it doesn’t help your credit score to close it and might hurt it. Please explain. — Reader, via email
A: If you don’t use a credit card, you may well ask why bother having it? The answer is, the more credit you have available, the less you have to place on one source.
In other words, if you have five credit cards with a $2,000 limit, you have $10,000 in credit available. If you control your spending so you owe no more than $5,000, you are well thought of by the credit community.
Let’s assume you get rid of two cards. Now you have only $6,000 available and you still owe $5,000. Now you are pushing the limits of your credit, and that is not good for your score.
If you simply close out an account, it can hurt your credit, but that will recover, other things being equal. If there are no costs associated with the card, such as a monthly or yearly charge, just put it away and let it run. It will not hurt your credit in that regard.
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