When Your Home Needs Repairs and You Don’t Have the Money, What Do You Do?

You’ve lived in your home for about 10 years now, and the honeymoon phase of ownership is officially over. Your place needs major renovation. A new septic tank, possible foundation work, and other serious items. Due to the rising cost of living, you haven’t done the routine maintenance to the house that you probably should have. Your credit isn’t the best, so getting an equity loan to pay for the repairs is not looking promising. You’d consider selling the home, but in today’s housing market, you might end up having to drop the price drastically.

What can you do about this?

A great many people face this difficult situation, and if you’re one of them, you know exactly what the stress feels like. But, according to Ilyce Glink, a columnist for the Real Estate Matters Syndicate, you may have more options than you think as far as getting the work done without breaking the bank.

Here’s how you make it work:

1. Get a copy of your credit report through www.annualcreditreport.com, which gives you an assessment from each of the three credit reporting bureaus.
2. Along with your credit report, you’ll be asked whether you’d like your score, which costs $6.95. It is a good value, as you’ll gain access to what lenders are going to see.
3. Get input from top-rated mortgage lenders, such as a national company, a big local bank, and a mortgage broker you know and trust. This is the best way to find out what kind of rate you’d qualify for and how much you’d pay for a home equity line of credit.

This is important because most people don’t realize that almost no one is turned down for every kind of loan. Your credit score might not be the highest, but it is probably good enough to get a line of credit or a home equity loan at a respectable rate. This is key. If you can refinance your Florida home loan and take out some of the equity, you might be able to make some of the required repairs.

It’s also possible that the house and its problems aren’t worth salvaging, and that the land it sits on is your prime source of value at this point. To find out, consult a local real estate agent about what’s going on in your neighborhood in terms of teardowns. You might be able to sell the house for at least your mortgage balance.

Lastly, if you’re forced to sell and are going to be in a short-sale position (that is, the house is worth less than the mortgage balance in the remaining term), be aware that on the following April 15, you’ll get a tax bill for the difference between what you owe and what the bank settles for. The IRS treats such sales as “phantom income.” If you owe $50,000 on the property, for instance, but sell to the bank for $40,000, the IRS will treat the missing $10,000 as taxable income.

It sounds unfair, but it’s the law. You aren’t going to beat the IRS on this one. Or ever. Consider all of these options with your Florida home loan and make the best decision based on your circumstances. It’s not an easy process, but you can get through it.