Here is the situation. We purchased our house about 6 months ago with a 6.375 interest rate and are thinking about refinancing it next month. Let me lay out our debt / assets for you. I really need some advice how to get out of this credit card debt..

$22K ($350/monthly payment) Credit cards (one of them with a balance of $13K is 0% interest for life)
$12K ($441/monthly payment) leased auto and the lease will be up in March. We can not turn it back in because the miles are so high on it (my husband got this before we met and did not keep track of his miles)
$306 monthly auto payment (also a leased auto for another year and 1/2)
$1086 house payment
$72 Cell phone bill for both phones
$318 Water, trash, heat, electricity, phone, cable and internet bill
$84 auto insurance - full coverage both vehicles
$76 Dance lessons for DD.. she is also in competition so there are other fees periodically
$0 for daycare but come summer time that will be about $500/month and we want to have another child which would be $500/month for daycare for the baby while DD is in school and $1000/month during the summer for full time care for both of them

We have about $2200 coming back in taxes
$8000 in a CD which will expire in Feb.
We are bringing home aprox $3500/month

I was thinking of putting the $2000 in savings since we have $0 right now and paying $8000 either on the CC balance or paying down the $12K auto payment. After that we were going to look at refinancing to consolidate the remainder of our CC debt and $12K auto debt. I do not want to be one of those people who refinance every other year I know that is one of the worst things that you can do. Also, I am pretty knowledgeable when it comes to finances so I don't know how we got ourselves into this mess.

PLEASE help me shed some light on this situation.. does our plan sound like it would work or are we going about this all wrong ??? TIA

SInce it is such a recent purchase , do you have the equity built up in your home?

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I read somewhere that it would be worth refinancing if the interest went down at least 2%.
So if you were to refinance to a much lower rate then maybe it would work better for you--although you just purchased your house 6 mos. ago. I think it would be a good idea to pay off your cc debt with the money from the CD because rates on CD's are lower than interests on cc's. And it's good to have some money for emergency--so the money from the taxes is a good start but should be built up more. Or here's another idea--is the cc with the 0% maxed out? Maybe you could transfer some of your other debt on there.
Hope this helps--but looks like you're headed in the right direction by taking charge and planning and doing something about it. Good luck!

Yes, the value of our home has gone up and we would be able to cover the debt.

How long do you plan staying in your home? How much of a down payment did you put down on it? Just playing Devil's advocate here. Say home values went down in your area (which seems to be a trend right now in many areas). If you had to move, you could end up owing more on the house than you have in equity + your mortgage. Then you'd be, for a lack of a better term, screwed. Just something to think about.

Once again I want to post the reminder that we CAN NOT buy our way out of debt. Likewise, we CAN NOT BORROW our way out of debt.

If you liquidated the 0% interest rate debt for your home mortgage you would be doing three awful things: (1) converting a 0% interest debt for a higher interest rate; (2) amortizing that debt over 15 to 30 years instead of the shorter term loan the credit card company is giving you; and (3) converting an unsecured loan into a secured loan which puts the roof over your head at risk. Do keep in mind, you WILL NOT be getting rid of your credit card debt by refinancing. You'll just be making the payments to another company.

If you keep the 0% debt as it is, you then have $9000 in credit card debt. I would hardly consider it worthy to incur a bunch of refinance fees just to roll in a $9K debt to your mortgage. And studies have shown that people who 'pay off' their credit card debt with home equity just go right back to charging up the credit cards again. I have seen this in personal experience, too. I learned a painful lesson by doing this and I consider it one of my all time worst financial mistakes.

The second worst financial mistake I have ever made was using my savings and investments to pay off unsecured debt. It takes a long time to accumulate $8000. Heck, you'd have to put over $180 a month into savings just to accumulate the $2200 again. CASH IS KING. Hang onto the cash you have unless you absolutely have no other option but to use it.

The leased cars may be a mistake and you may be feeling some regret over the credit card debt, too. GOOD! Let those decisions turn out to be painful lessons. Pay back the credit card debt, especially the $9K as quickly as you can WITHOUT using the equity in your home. If you can fit $500 in your budget for summertime daycare, then I strongly suggest pretending you are paying the money now and put the $500 a month toward the credit card debt IN ADDITION to what you normally pay on the card.

At the same time, increase your reluctance to live without any savings. Where is your emergency fund? If you have an emergency fund, you're less likely to charge an item to the credit cards. Obviously the first order of business is to stop using the credit cards. It is awfully hard to pay them off while you're adding charges to the balance.

As for the cars, you can turn in the high mileage vehicle but you'll end up paying for it. That might be a good thing. You may prefer to get rid of this vehicle all together. However, if you like the car despite the mileage, it may be worth your while to pay the price to buy it at the end of the lease. You can also see about converting the other vehicle to a purchase instead of a lease or you could see about having someone else take over the lease so you can get out from under it. IF you get out from under at least one car lease and pay off the other, you could end up buying a safe vehicle for less than your current monthly payments on both.

Do you want to send both children to daycare? Would you consider changing your lifestyle so you could stay home with your children? $1000 a month is like adding on another mortgage payment. Have you done the math to see if you would actually be benefitting from working?

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"Poor people work for their money. Rich people make their money work for them."

What I would do is take the 8000 from the CD and your tax refund and pay down the lease that ends in march. That leaves you with 1800 that you still owe on it. If you still pay 441/month you will only make about 6 more payments and then it is DONE. Do not refinance. It will be very very hard for you to get an intrest rate much lower than what you have now. And after closing costs you wont see any money 'saved' for a few years. We bought our home new construction 3 years ago at 5.5% and we tried to re-fi for extra money to landscape our backyard or finish our basement. No one could come close to 5.5 and we have great credit. So what we did was take out a home equity loan for 18,000 and finished our basement and took out all the carpet in the house and installed hardwood floors. Now if we sell the house today we will profit 45,000 after paying off the mortgage and home equity. Its really not a good idea to take out a home equity loan if you dont plan on actually making any improvements in your home. Like Kim said if the prices of homes in your area go down and you owe more than your house is worth and need to sell then you are in an awful position to say the least. We live in the atlanta area and our homes value increased by 20,000 in the first year after we purchased it so if you live in an area similar you may be able to get a home equity loan and pay off all your debt and do some upgrades on your home. Our neighbors did that.....they took out 30,000 and paid off all of their cc debt and installed wood floors in there house as well. But again there house didnt appraise higher than what they owe on it. Since they used most of the money to pay off other high intrest debt.....

Good luck with whatever you decide.

Thanks to everyone who posted and who will continue to post their ideas for us. It really gives me something to think about. I guess I was just thinking about the instant gratification of not having those monthly payments anymore and my mortgage payment going up a little. I will honestly take a look at our situation and what is best for us. I am leaning more towards paying down the leased vehicle and then when that is paid off paying down the higher interest CC. The 0% CC is basically maxed with a $13K balance on it and we will just continue to pay on that as we have and once the higher interest CC is paid we will put that money towards the 0% CC. The Refi I think is now out of the question. I really appreciate your help