So just what is a credit score you may ask? It is a value that is obtained through a variety of calculations based on your current financial situation that returns a score between 300 to 850. It was created by the Fair Isaac Corporation to help lenders determine the interest rate that will be charged to homeowners applying for home equity loans.
If you have a low credit score you will pay a higher interest rate. If your credit score is above 700 you have a much better chance of obtaining a line of credit with a competitive interest rate. Lenders will also use your credit score to determine whether or not you are a good candidate for a loan in the first place. This score can also be used to determine how much credit they will extend to you.
There are three different credit agencies in the United States, Experian, TransUnion, and Equifax. They are the primary agencies responsible for calculating credit score with each of them scoring a little bit different. If you have low credit you can ask for a free copy of your credit report from all three agencies. This will allow you to see what the problems are and what you can do about it.
Raising your credit score to receive more favorable terms on a home equity line of credit can be done with a little time and patience. Once you have your credit report the first thing you need to look for are false claims of money you owe. If you can prove that you have mistakes on your report you can start to raise your score.
Another way to boost your credit score is to be caught up on all your current payments and pay down as much debt as you can. The more unencumbered credit you have the higher your score. This does not mean to get more credit but to take care of the credit you do have. A score of 640 or less is a sign of bad credit to most lenders and will require you to take action to correct the problem.
Surveys show that nearly 80% of all credit reports contain mistakes of some sort. This is why it is important to check your credit report from all three agencies at least once a year. Doing so can save you thousands of dollars in interest.
Getting a bad credit home equity line of credit is possible, but the interest rate and terms of repayment will not be favorable to you. It is much better to try and raise your credit score before applying for any type of loan for the simple fact that you want to keep as much money in your pocket instead of your lenders.
mr Smith
July 10, 2009 at 9:27 am
You would need to contact a mortgage broker/banker that do hard money loans.
These hard money loans will allow you to borrow up to 50%-60% of the After Value Repairs ARV) of the property. So based on the appraised value you have you would be eligible for approximately $67,000.
If you only need $30,000 then you are within the limits of what you can borrower.
These type lenders will give you a loan amortized for 30 years but the loan would be due in 5 years, some will make the loan due in 10 years, but this is rare. Your monthly payments would be as if you had a 30 year mortgage loan.
Now by the name of the lender you should know that you are not gonna get the very best rates in the world, but you would accomplish what you want to do and that is build your garage and make other repairs that you think are needed.
These lenders look more at the project (Property) as oppose to the borrower and his credit scores and other things that a conventional lender would look at to include most government underwritten mortgages
In most instances your interest rate on loans are tax deductible on your federal income tax.
For tax and legal matters you should always consult your tax consultant and attorney.
After the five years and your monthly mortgage payments made on time you would be able to refinance your home at the appraised value at that time and you would have your garage built and other repairs done if necessary.
I hope this has been of some use to you, good luck.
"FIGHT ON"
inabind
July 10, 2009 at 9:49 am
A couple of years ago, the equity in your home would've been good enough, but not today. Since no investors want to go near real estate these days, and with homes falling in value daily, the "equity" in a home is relatively unknown. There are millions of people bailing on their mortgages and the lenders are stuck with the houses. They don't want to own houses.
I sold my house last fall. I had it on the market for about 7 months. I was still able to afford it, but I was sick of feeling "house poor" as I wasn't really able to save money, and wasn't able to put enough money aside for future repairs (which is essential if you own a home because things will always go wrong). Selling it was the best thing I've ever done. I'm renting a house of similar size in a nice neighborhood, and it's costing me $1000 less each month than the house I owned! And I bought my house before the bubble.
Today, frankly, your options are limited. An equity loan might be a good deal if you can get it and the interest rate is less than you're already paying. However, if you're already in debt, I can't imagine that an equity loan would help your situation. Worse, if you're not able to pay that loan, you can lose the house, and since you bought it in 1998, you should have a lot of equity in it. Have you considered selling it? I know that the market is not great, but in my area, I've noticed houses selling in about a month. And not owning a house has been a tremendous relief for me. If the roof leaks, I don't have to worry about paying for it! Also, it's better to be in control than have the bank in control. Home ownership is WAY overrated. The mortgage interest these days alone is more than rent, and then there's insurance and taxes on top of that. It's a really bad deal.
Eviscia
July 10, 2009 at 4:36 pm
My boyfriend just bought a house, and while he doesn't have bad credit, he didn't have any money saved up. He went through a first-time home buyer's mortgage company and didn't have to pay a cent down. He started making his mortgages payments a month after he got the key and everything is perfect, got great interest rates, etc.
As far as a second loan for heat and stuff, i doubt you can get one and if you do the interest might be insane. A lot of mortgage companies will finance in certain things like new windows and a heat pump. They offered us new windows but we're paying for it separate. Also, you will get the first time home buyers credit from the IRS if you havent bought a home in the past 3 years. It's 10% of the loan amount up to $8,000. So for an $80,000 house you can get $8,000 from the IRS and not have to pay it back-at all. So check into that too.
Also, if the house is in too bad of shape, you might not get an insurance company to accept you…this is something to think about because even though your offer might be accepted, you might not get things lined up in time to actually buy the house before the contract ends so there are so many things that can go wrong–just be prepared.
Queen
July 11, 2009 at 12:03 am
Your water issue is the first thing you need to address. Get a ladder and some waterproof fibered sealer and seal those cracks before the water causes any more damage. The good news is that it's a fairly inexpensive fix. The yard and patio can be done later, that's cosmetic, but water leakage can cause serious structural damage so that has to come first. There's a free subscription to askthebuilder.com that could be very helpful to you. I subscribe to it and get a lot of useful information from a master builder and his colleagues. And it's absolutely free. Best wishes and good luck fixing up the house. I was in much the same situation 15 years ago. I bought an old wreck of a house and started fixing it up. It's in pretty good shape now and there's no mortgage or loans. Keep in mind that your structural issues are first priority and get it done.
Mark
July 11, 2009 at 3:03 pm
you definitely should have done research before going into any loan with any bank. Most banks are prime- 0.50% and you probably should have looked around for one that didn't charge closing fees…..the good news is, do your research now, wait a few months and pay off this one with a more competitive offer.
do it movin'
July 11, 2009 at 9:47 pm
A HELOC is like a mortgage, except that the equity doesn't get pulled out all at once. It stays on the house until you need some or all of it. Usually your bank will issue you a check book, and every check you write on it will pull out equity. Does that make sense? There's usually a minimum on the amount of the checks you can write (anywhere from $100 to $1000 minimum per check).
Honestly, owning your home outright is one of the best financial moves you can make. If you don't need a HELOC, you probably shouldn't get one. At least, it won't really benefit you financially more than not having one. Some people love the convenience and security they offer. You would have $50,000 available to you at a moments notice if you needed it. Of course, interest rates are usually higher than on traditional fixed rate loans. On the other hand, you would only be paying interest on the money you actually need to use. . .
There are plenty of pros and cons.
nick cave
July 12, 2009 at 7:00 am
The adjustable rate aspect of a HELOC is a big disadvantage. And it gets worse. Unlike a typical ARM there are no adjustment or lifetime caps to limit the rate/payment fluctuation. Also your rate is calculated on a daily basis where a traditional ARM is based on a monthly calculation ( it's a small difference but something you should be aware of) take another look at your present 6.5% rate.
The tone of your question suggest that you view your HELOC as an insurance policy should you have a need for cash in the future. Which is an excellent strategy.
Now to address your real question as I see it.
You don't want to turn your HELOC into a fixed rate loan while you still have a considerable limit left to draw on.
May I offer a solution.
You can do a cash out refi on your 1st mortgage and use the additional funds to pay off your heloc balance. Of course Cap 1 would have to subordinate themselves to the new first
or
You could do a cash out refi on your 1st mortgage. Payoff and close your Cap 1 heloc and get a new one possibly with a higher limit but definitely with a better rate. 6.5% in todays market seems steep.
W D
July 12, 2009 at 5:10 pm
Simple. The first morgage will foreclose. It will pay itself off from whatever the foreclosure sale brings in, including paying off its costs in having to foreclose in the first place. If there is any money left over, it will go to pay off the second mortgage. If the money from the sale isn't sufficient to pay off both, you will wind up owing the rest and getting a really bad credit report. And you condo association might also get involved in foreclosure if you dont pay the assessments. Sorry>
Rhonda E
July 13, 2009 at 12:02 pm
And of course we would expect our great-grandchildren to paying for all this stimulus, right?