Well, I'll start off in explaining the events that led up to where I find myself in the current state of financial affairs.
I bought a house on the outskirts of a major Southern city in 2011 at the near bottom of the 2008 financial crisis, single family home with FHA rate of 3.49% and house purchase price was around $130k, with $5k down. Currently, the house is worth close to $180k, so a nice revitalization in the neighborhood all around, I love it and people around me. I made improvements that have likely added another $20k (new garage door, insulation, appliances, covered gutters/wildlife protection, etc.).
In early 2014, I got invovled in a relationship and made several snap decisions to constantly help her out with some financial issues by depleting virtually all of my savings and obtaining a personal installment loan of around $20k and currently pay close to $700/month. (And before you ask, she's still struggling with her financial issues, it's over now) That's not to mention all of the other strain that my remaining credit card accounts have on my finances. Not only that, I encountered some unforeseen medical issues in 2015 that are thankfully almost over, but since I thought I was immortal being in my early 30s, I figured a high-deductible health care plan through my employer would be the smart decision this year; was I ever wrong about that.
The cash flow problem really started last Fall where I fell behind on some payments including making 30 day late payments on my mortgage from the period of July, August and September. I've never been late on any account since then and my credit report shows that I paid on-time for all accounts since the payments were less than 30 days overdue at the time, with the exception of my mortgage. I regret not giving the mortgage priority with regard to paying on-time, since that's the only negative account listed on my credit report, but shows "pays as agreed" status with on-time payments for the past nine or so months through June when the date of last activity was reported.
I really need to get rid of the $20k installment loan to significantly improve my cash flow and was wondering about a couple of options.
First, I was thinking a cash out refi to wipe out the installment, but I doubt anyone would do that considering I have less than $5k in reserve for a down payment and a 582 credit score.
The other option is a second mortgage or home equity line of credit, though I haven't done a lot of research, there seem to be restrictions on what you can do with equity collected from a second mortgage against an existing FHA loan. I just want to use the proceeds from equity to pay off all of my open accounts which total around $35k.
The questions I have:
1. Will my credit score significantly improve after my Mortgage Servicer reports 12 consecutive months of on-time monthly payments towards the end of the year, considering it will be 12 months this October and will the account be removed from the "negative" category? (Their credit reporting seems to be two months behind)
2. Really stupid question that I think I know the answer to but here goes: Do you have any knowledge of an installment loan being closed out as a lein against the equity of the equity of the account holder's primary residence? (I've seen wild things in this lifetime so far, so I thought I should just ask)
3. Any other options that might accelerate my predictment, other than obviously walking away from the home I dearly love, going the renter's route for a couple of years and taking the cash proceeds to paying off my exhorbant debt load?
