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HELP! Wife and I are looking at getting a credit line up to 100% of home value. Wife recently had surgery and has been unable to work, so we have maxed out our credit. FICO score is about 630, I have been getting all kinds of different offers and not sure what to do. Home is worth at least $290k and existing mortgage balance is $262k. We have about 20k in revolving debt and I was really just looking to consolidat that. Some companies have offered to refinance the entire loan, which is fixed at 5.5%. I know the interest rate will go up if I do this, but these companies are also proposing to get rid of mortgage insurance (right now we pay $150 a month for this). The idea would be to improve credit score and do another refinance in a year or so. Have been quoted a 2/28 loan (fixed for 2 years and adjustable thereafter) with interest rate of 6.4%. This company claims it can value my house at over $300k but I know that is high. The would loan 302k, which would pay off the first loan, all credit cards and even give us about $5k cash out to pay some of our legal bills. The loan discount/origination fee is VERy high at 3.4% (over $10,000!!). I definitely have reservations of this loan for both the overstated value of our home's value and the high loan fees. I know I am going to pay a little bit more due to lower FICO score. I feel more comfortable just doing a second. What do you think? Thanks for your help.
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