Q: I need a loan in order to pay my real estate property taxes and credit card bills. My house is worth $555,000 and I owe $417,000. What should I do?
A: The good news is that your house appears to have some equity, so perhaps you can get a home equity loan for a small amount.
Most lenders won’t provide a home equity loan if your primary loan and second loans total more than 70 to 80 percent of the total value of the property. Many lenders now are refusing to give any home equity loans above what they believe is 70 percent of the value of the home. Whether the value they give a home is right or not is another question. If you decide to apply for a home equity loan or home equity line of credit, you may have to work closely with the lender to make sure they value your home correctly.
Right now, your home loan-to-value ratio is about 75 percent, but you might find a community bank or a local savings and loan that is willing to help you out with a small home equity loan for 5 percent of the property’s value, or $20,000 to $25,000. You might even try a bank with which you’ve had a long-term relationship.
Another option would be to sell your property and use your equity to pay off your real estate taxes and your credit card debts.
While selling your home may not provide you with the kind of fast cash you need, and it may not be the solution you had in mind, it might be the best way to pay off your debts and start clean. You might be able to trade down your home to a more affordable home after paying off your debts.
Read more from our topic page on paying off credit card debt. You should find some very useful information on paying off your credit card debt.
You can also learn how to pay off multiple debts by reading this additional article.
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