Should I refinance after losing my job?

I was recruited from my job of 3 years by a higher paying job. They changed their minds about the qualifications of the position days into my employment and let me go. Now I have no steady income, a mortgage ($107K), $14,000 in credit card debt, and other bills. I received an offer to refinance my home, credit card debt, and an additional $10,000 cash for a monthly fixed rate charge of $596/month (escrow not included). Currently I pay $1,070 for just my credit card and mortgage. On the surface it seems like an excellent opportunity. I still have 2 paychecks due to me as well as a payout of my student loans and grants- which together should add up to around $6,500. As I'm vigorously searching for employment, I fear losing the ability to take care of my wife (also unemployed) and kids.

My concern is the impact it could have on my credit. I am currently between 710-725 and understand that this could cause a small dip in my score. I do not plan on moving or making any other large purchases in the next 3 years. I would like my score to stay above 700 because I have worked hard with low income to maintain a respectable credit score.

Is this a good decision? Would I face any negative affects from this? Would you consider the pros in my situation to outweigh the cons? Are there any surprises that refinance companies may throw at me after I agree to the terms as I understand them?

Debt, Financial Planning, Real Estate
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August 2016

Based on the facts you laid out, the answer to your question lies in cash flow. I’m not sure there is any right or wrong in the decision you’re about to make but it seems to me the refinancing offers an opportunity to consolidate your debts into one payment which, under most circumstances, is much preferable to multiple payments. You're caught in an awkward situation and although you’re seeking employment, there are simply no guarantees. Put together a cash flow analysis of all your expenses and your anticipated sources of income. I think the refinancing becomes obvious as long as you can do it with minimal fees. The lender will be required to provide you with a HUD statement in the should lay out all of the fees and hopefully with no surprises.  I hope this helps a little and good luck.

August 2016