Need creative advice to pull equity out of my home ?

Question

Hi everyone, I’m a rookie here from Northwest Florida, and I’m not sure if this is the right forum for my post, so please let me know if I should move it elsewhere. Here’s a quick summary: I’m retired but finding myself needing to re-enter the workforce. I own a fully paid-off home valued at around $275,000, but that's all I have. my credit is poor, and I’ve had minimal income over the past couple of years, which doesn’t reflect much creditworthiness. My goal is to access the equity in my home without selling it, so I can start fresh. I have an extensive background in residential construction, having built several properties from the ground up, and I’m looking to focus on either fix-and-flip projects or a niche market for small residential homes in my area. Any advice, insights, or direction on how I might move forward would be greatly appreciated. Thank you!

Patrick Roberts · Answer

Since this is your home, you will be limited to traditional mortgage options. Any kind of cashout refi or heloc will require income (ability to repay) and decent credit. A last ditch option would be a reverse mortgage, depending on your age.

This addresses the how. Another glaring question here is whether you should do this. If I get the situation correctly, youre wanting to exit retirement and pull cash out of your home to use to flip a property in FL to generate income to live off of. I strongly, strongly recommend not doing this. You could very easily find yourself broke and homeless with no way to recover.

A better option would be to partner with someone who can bring the capital needed in exchange for you contributing your time, labor/effort, and expertise.

Travis Timmons · Answer

You need more income, not more debt. Borrowing against your paid off house without an income puts way too much pressure on the success of whatever deal/project you decide to pursue.

Monty Alston · Answer

Thank you, Patrick, for taking the time to share your advice—I genuinely appreciate it! That said, in the scenario you described, I’d either end up homeless and broke or starving to death, lol, while sitting on $275K of equity. My current situation is, in part, a result of playing it too safe and avoiding risk altogether. So, while I completely understand your perspective, I’m looking for a way to balance taking calculated risks with creating a stable path forward. Again, I sincerely value your input—thank you for taking the time to help!

Justin Landesman · Answer

@Monty Alston sorry to hear about the tough situation that you are in but glad you are being proactive about it. If you are looking to pull out equity on your home to start to do some fix&flips(great idea) then it would all depend on how much equity there is in you home and your current income(SSI,retirement etc). If the use of the funds are for business purposes, like investing in real-estate, you will have an easier chance of qualifying for a loan documentation and income wise. However, the LTV that you will be allowed to borrower will be less, in the 60-70% range max. Hopefully this gives you some direction. Wishing you all the best!

Monty Alston · Answer

Travis, you’re absolutely correct, and I truly appreciate your insight. I’m also in the process of launching a new home inspection company, which I’m confident will help me get back on track financially. Without going into too much detail, my current situation stems from selling a previous company via partial owner financing, only for the new owner to default on the purchase, leaving me in this position.

For traditional financing, I understand I’ll need at least one, if not two, years of solid credit history, tax filings, and other financial documentation. In the meantime, I’m exploring creative solutions to access the equity in my home while simultaneously rebuilding a credible and sustainable business. Thank you again for your thoughtful feedback!

Patrick Roberts · Answer

I get it - tough spot to be in. Dig into reverse mortgages before pulling the trigger on anything, specifically HECM's (FHA product). Theyre expensive, but you wont lose your home to foreclosure unless you move out, stop paying taxes/insurance, or fail to maintain it.

Depending on your income needs, pulling equity out and lending privately combined with a fulltime or part time job may be another option that doesnt bring as much boom or bust risk as flipping.

Patrick Roberts · Answer

Since you have work history, if you get a job with salary income and a credit score above 640 (680 realistically), a conventional cashout refi is within reach as soon as you reach those metrics. If you go self-employed, youll need two years tax returns. Most Helocs will require a solid year of tax returns, if not more.

Ericka Parrott · Answer

Monty, take a small amount of time to work on your credit daily. There is the Experian Boost that adds monthly utility bills as credit and various apps and facebook groups. You will appreciate what a couple of month of effort and education can do for your credit with very little financal output.

Steven Adler · Answer

Any thoughts on selling your home all together? You are (older/retired) and could benefit from house hacking and buying a duplex, or renting a room. This could potentially meet your financial needs by itself as well as provide start up money to do flips or purchase buy and holds

Bryan Maddex · Answer

Hello Monty!

First, lets set some inaccurate information straight.  There are a couple of companies out there that will let you do a cash out refinance with no income! Rates are high, usually in the high 8s or low 9s, and you may pay 2-4 points on the loan.  But, you can go up to 65% loan to value with no reserves, or up to 80% loan to value if you have 12 months payments already in the bank (12 months reserves_. The harder part for you may be credit scores. These programs usually need a 700+ score. Last, like i tell many clients, "just because I have a program doesn't mean you will want it". Helocs have many different ways to calculate income once you get outside of the bank world.  Bank Statements and Asset Depletion can be used with helocs! There are plenty of banks across the US that also have a stated income heloc (in the Carolinas, First Citizens will do up to $100k with no income verification).  You do not want to lie on an application, that is mortgage fraud. But what you make and what the IRS thinks you make can be two very different numbers.  Credit is also going to hinder your ability to get a heloc, and lack of income for now. Reverse Mortgages (HECM or Home Equity Conversion Mortgage) can be a FANTASTIC tool!  The loan to value that you can go up to will mainly be determined by your age. Credit is a factor as bad credit may limit options, or may have the lender require you to put 10 or 20 years of taxes and insurance into escrow. Last, there are several companies out there that will give you a "mortgage" and not have you make payments!  These programs are called Equity Share programs. You are essentially doing a partial sale of your home. They do not collect payments, but when you sell your home they will get some of your equity appreciation. I have access to several of these programs but have not dived into them deeply. They do require these to be done on Primary Residence, and they probably do have a credit component, but may not have an income component to underwriting. If you are interested in these options, reach out to me and my team can go deep with a couple of our lenders that offer these programs. Now, lets talk about credit.  Credit Karma has a fantastic "score simulator" tool that you can use to project credit score changes (paying off balances, opening a new card, using an old card that has not been used in some time, just paying your bills on time for 6 or 12 months). I highly recommend you play with that tool to start getting an understanding of what things you can do to positively affect your credit!  Credit Karma uses a Vantage scoring model (which we do not use in the mortgage industry), but the trend will be the same as mortgage scores.  If you can get your Vantage Score up 50 points, you will see positive results on the mortgage scores as well, it just may be 30 or 40 points or could be 60 to 80 point increase vs Vantage increase of 50 points. Another great tool to use is myfico.com. You can pay $29.95/month on their Advanced subscription and see where your actual Mortgage FICO scores are at!  Cancel after you pull, unless you like the tools it offers. If you go back into the workforce, you may need to be back to work for 6 to 12 months before your W2 income can be used.  If you go back to work as self employed, there are some NonQM programs out there that can do a cash out refi after just 1 year of bank statements or P&L. I would focus on credit, consider some alternative options to "free your Benjamins" out of your home, or even consider doing a partial sale of your home to give you capital to get back at it!Here for you if you have any questions and good luck relaunching yourself!

Need creative advice to pull equity out of my home ?

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