cancel
Showing results for 
Search instead for 
Did you mean: 

Financing inherited house

Auto Loans for ANY Credit Situation. Immediate Response.
Advertiser disclosure
New Member

Financing inherited house

I recently inherited a house from my grandmother. The house is paid off, but in poor repair. I would like to know if I would be able to find a lender who would loan me the money I need to do the repairs. My current situation is this, I am employed fulltime(55k year) , I have 1 credit card with a 1k limit and 250 balance, I have a car with a loan balance of 8k (orig $43k) , I do have a collection on my report that I am disputing, it is from an auto repossession years ago. (5 yr) that was settled for the original debt, but not the extras (fees, finance charges) apparently the debt was sold just as we came to an agreement. Now the new owner is saying I owe the whole amount. So this point my credit is in the toilet. TU 660, EX 634 & EQ 649. Before I begin this search. I'd like to know what my chances are and where do I start. The house was recently appraised. @ 273k. This was done because i was going to sell it about 5 months ago. I'd like to borrow about 100k as I'd also like to expand a room if possible. Thanks in advance for any help.
Message 1 of 11
10 REPLIES 10
Established Contributor

Re: Financing inherited house

A home equity line of credit (HELOC) is your solution to this. Rate is affected by your credit score though, so you will not get the best rate with those scores. With the home being owned free and clear though, the LTV will be low, lowering the overall risk so it will help.


Starting Score: 627 EQ, 621 TU - 11/15/08
Current Score: 778 EQ, 781 TU, 778 EXP 07/20/12 Lender Pull
Goal Score: 800 EQ & TU


Take the FICO Fitness Challenge
Message 2 of 11
Senior Contributor

Re: Financing inherited house

FYI - those scores aren't in the toilet and a lot of us would be proud of those scores.

STARTING: 11/24/10 EQ-584 EXP-648 TU04-595
CLOSED FIRST HOME 8/19/11 EQ-630 EXP-691 TU04-653
CURRENT: EQ-701 EXP-??? TU08-720
Message 3 of 11
New Member

Re: Financing inherited house

Thanks for the reply. Are equity lines tax deductible? I was told by a friend they are not and that they often have a variable interest rate. How would I go about talking to someone to find out. I don't do well with high pressure sales tactics and would like to be as armed with information as possible before I start. Which is better an equity line or eqiuty loan and what are the primary differences? Again thanks for any reply, I don't mean to sound naive, but I've read through many of The post and am as confused as ever. Just trying to figure it out so I don't make a monumental mistake
Message 4 of 11
Moderator Emeritus

Re: Financing inherited house


@MzAdventure wrote:
Thanks for the reply. Are equity lines tax deductible? I was told by a friend they are not and that they often have a variable interest rate. How would I go about talking to someone to find out. I don't do well with high pressure sales tactics and would like to be as armed with information as possible before I start. Which is better an equity line or eqiuty loan and what are the primary differences? Again thanks for any reply, I don't mean to sound naive, but I've read through many of The post and am as confused as ever. Just trying to figure it out so I don't make a monumental mistake

The interest on HELOCs will be tax deductible since you are obtaining the loan for the purposes of improving the property and because the amount you intend to borrow does not exceed the market value of the home.  HELOCs that are taken out for paying college expenses, buying a car, or consolidating debt (i.e. not related to the home itself) are subject to limits on the amount that can be deducted.  But that's not an issue for you.

 

HELOCs do have a variable interest rate that is tied to the prime rate (which is based on the Federal Funds rate).  Currently, the prime rate is essentially at the lowest rate possible, because the Federal Funds rate is currently just 0.25%.  In general, HELOC rates are lower than the fixed-interest home equity loans, but theory could rise above the rate of fixed-income loans that are currently available.  That is, you might be able to get a home equity loan with a 6% interest rate, whereas a HELOC's interest rate could be nearly 2 percentage points lower.  As the economy recovers, however, the Fed will start raising the FF rate and thus the HELOC's interest rate will go up.

 

At recent Fed meetings, they have indicated that they intend to keep the FF rate at low levels until the middle of 2014, but that could change if the economy makes a big turnaround.

 

If you want the security of a fixed interest rate, then the home equity loan would the choice for you.  You will pay more interest over the near term, but your payments will never change.  If you would prefer to have a lower interest rate at the outset and are willing to tolerate the risk of a rising interest rate, then a HELOC would be the better choice.  You will need to make sure you have the discipline to pay down your HELOC debt, because many HELOCs allow you to pay only interest for the first several years of the loan.  If you do this, then you could find yourself with the same amount of principal debt, a higher interest rate, and shorter period over which to pay off the loan in its entirety.

Message 5 of 11
Contributor

Re: Financing inherited house

Can he get a home equity loan on a paid off house? I own two free and clear and called a few lenders last year about a equity loan and was told by all I had to actually put a mortgage on it instead of a equity loan since there was no mortgage , did I get lied to?
Equifax Feb 2012 690
TU Feb 2012 720
Message 6 of 11
New Member

Re: Financing inherited house

Thanks you soooo much. This is valuable information for me.  I thank you so much.  This has given me confidence to call my bank and talk to a loan person. I feel confident I can at least begin there and half way know what I am talking about or requesting from them without sounding totaly like a newbe.. Thanks again. 

Message 7 of 11
Established Contributor

Re: Financing inherited house


@Booner72 wrote:

FYI - those scores aren't in the toilet and a lot of us would be proud of those scores.


I never said his scores were "in the toilet". I simply stated he is not going to get the best rate with his scores.

 

And if you want fixed rates, then yes a Home Equity Loan is your target instead of a HELOC.


Starting Score: 627 EQ, 621 TU - 11/15/08
Current Score: 778 EQ, 781 TU, 778 EXP 07/20/12 Lender Pull
Goal Score: 800 EQ & TU


Take the FICO Fitness Challenge
Message 8 of 11
Moderator Emeritus

Re: Financing inherited house


@GoingTo800 wrote:
Can he get a home equity loan on a paid off house? I own two free and clear and called a few lenders last year about a equity loan and was told by all I had to actually put a mortgage on it instead of a equity loan since there was no mortgage , did I get lied to?

I don't know the answer to this question, but if you had to take out a new mortgage, the interest rates would be a lot lower than a home equity loan.

Message 9 of 11
Valued Contributor

Re: Financing inherited house


@Booner72 wrote:

FYI - those scores aren't in the toilet and a lot of us would be proud of those scores.



+1 million Smiley Wink

Starting FICO Score: 10/10: TU 498 | EQ: 502 Current FICO Score(lender pull): 09/14: TU: 784 | EQ: 752 | EX: 784
Collections Removed: Hunter Warfield, CBE Group, Merchants Credit Guide, EOS-CCA, Enhanced Recovery, Portfolio Recovery, UCB, American Collection Company, Medical Business Bureau, Jefferson Capital, Credit Portfolio Associates, FCO, LVNV, Convergent, Armor Systems
Other Negative Entries Removed:Plains Commerce CO, HSBC CO, 2008 Judgment Santander Reposession


Positive Accounts:10/10: 0 | 07/12: 6 | Mortgage Closed 5/12, Macy's AMEX $13900, Citi/Home Depot $8500, Capital One Cash Rewards $3500, BOA $7500 Total Utilization: 3%. AAoA: 2yr, 9mth. INQS: 1 TU, 1 EQ, 3 EX
Message 10 of 11
Advertiser Disclosure: The offers that appear on this site are from third party advertisers from whom FICO receives compensation.