Everybody I talk to says that refinancing your home and using equity that you have in it to pay off other stuff is bad. But I don’t own my home yet so I have no first hand knowledge.
I would rather have the house paid off faster than be worrying about the car. Also, note that you should be paying down your mortgage bi-monthly. Make sure the ‘new’ mortgage is set that way. At least you will repay off your house faster than if you pay once a month.
I am toying with this problem myself, as I have an Explorer Sport (two door) and now that our baby is here, it’s a pain in the ass to get in and out of. It doesn’t bother me so much, but my wife complains about it anytime we go anywhere. We still have 2 years left for the payments on it, but I think I am going to suffer it out, and if it’s that big of a deal this summer, then we’ll get a used car, something like a 4 door Grand Prix. I’d like to trade the 2 door in on a 4 door, but I’m not sure it’s worth the hassle of figuring out the loan payment and all that.
You may be better off trading the SUV in on some sort of an economical car that you are interested in. It would mean keeping payments on something, but quite likely the new(er) car would be less.