We took out a home equity line of credit on the old house at closing for the new house to temporarily cover the down payment until it sold. We put the old house on the market 3 months later after taking some time to fix it up a bit(I couldn't do it while we lived in the house as we had a new baby). Luckily for us it paid off- the house sold in 1.5 weeks. It was at the start of the real estate collapse (Spring 2008).

One of the biggest problems with any scheme to pay off credit cards by using more credit is most people do NOT change their spending habits. The average consumer will take out a home equity loan to pay off outstanding balances and then only 2 or 3 years later find themselves with a home equity loan and credit cards at their max again. That doesn't solve the problem; it makes it worse. Plus there is the potential to lose you home if you fail to make payments on the home equity loan. In my humble opinion, this is not the best solution to your problem unless you and your significant other make some changes in your spending habits. Switching from one low/no interest credit card can be very damaging to your credit score. One of the components of a credit score is how long your current accounts have been open. Longer is better. New credit cards every 6 months will lower your score which means you pay higher rates or cannot qualify for those "teaser" rates. Also, be aware that the teaser rates will escalate very rapidly if you are ever late with a payment. The solution that I suggest to the personal financial management classses I teach is to stop using credit cards for any daily expenses. Save them for emergencies (a death in the family, an earthquake destroys your house, a hurricane is coming and you have to evacuate). Concentrate on paying off one card by paying extra on that card every month but continue to make the minimum payments on every card you have. When that card is paid off, apply that payment to the next card until it is paid off. If you have trouble avoiding temptation with credit cards, put them in a ziplock bag and seal it. Put that bag in another bag and fill it with water. Put both bags in the freezer and leave it there. Anytime you need a card it is available, but you have to wait to thaw it out to use it which means you have time to think about whether or not you really, really NEED what you plan to purchase with credit. While it sounds "dorky" and simplistic, it does work. Good luck

I realize the original post is relatively old, but here I go: You need to review your documents and contact your lender. This varies widely from company to company and loan program to loan program. With the finance company I work for, in my state, any payment in excess of the interest owed on the date of the payment is automatically applied to the principal. You don't have to ask. You don't have to write two separate checks. You don't have to do anything but pay more than the interest that has accrued on the loan. We also don't have prepayment penalties in my state (with my company). You need to contact the lender, but definitely review your documents. A representative can tell you anything (a lot of people are just plain stupid or misinformed, and they have jobs with banks, finance companies, hospitals, and a number of other places where their ineptitude will seriously impact people like you and me), but it will never be as legally binding as the documents you signed. If you no longer have copies of your documents, you are well within your rights to request them. This question can't be adequately answered in a forum like this without access to your loan/line of credit documents.

Thanks for all of the feedback, folks. Renting is still certainly an option, but that $8,000 tax credit keeps whispering to me. I don't need the $8,000 tax credit to make this "work", but it would certainly be nice. As far as additional expenses that come along with homeownership, I must say that if I stay in this area, I'll be paying approximately $1500/mo + utilities, along with whatever outrageous pet fees and pet rents they will add on. For what it's worth, I've got money in accounts I'd rather not touch right now, but I can access. I also have my debts covered by insurance that kicks in if I'm disabled or unemployed. I've got a sizeable amount of available credit (the balance are small, but the credit limits aren't), in case of a terrible emergency. When it comes down to it, I've got more than enough cash/cheap credit around to tackle any catastrophe worth dealing with on a $130K property. I'm an insurance freak, so I don't have any debts that won't be paid if something happens to me, and even the pets have veterinary insurance, so a veterinary emergency won't make me choose between paying my bills or paying the vet. Again, for what it's worth, I'm focusing on houses without pools (don't want the maintenance expense), I'll be working from home (no commute/minimal gas expenses), and I am also focusing on houses new enough that everything won't start to break as soon as I move in. I've wanted to buy a home for years (but lived in an absurdly high COLA area), and I really feel like I've thought this through as much as I can without making sure I'm getting a reality check from everyone. Short of saving up for years to pay cash for a home, I'm not sure I'm in such a bad position to buy a house. With that said, I don't want to be the poster who just posts to get everyone to agree with her, regardless of the facts. So, I really appreciate the feedback. In my situation, with the pets, it just seems like I'm throwing away so much money on pet deposits, pet fees (nonrefundable), and absurd rents to continue doing the "sensible" thing and renting until all the moons align and I can pay cash for a huge portion of a home. One of my biggest considerations is the fact that I could take a 50% pay cut and make out. The mortgage/utilities on these houses = still less than I've paid in rent in years (and at much lower salaries). At what point does, "I really really want a yard and a dog" come into play? I get the impression that, for some locations/situations, renting will always be the most "sensible" solution, but then why do people even bother to buy homes? So, really, when do the scales start to tip in favor of buying a home vs. renting a home? Thanks, all! I've got a lot to think about.