Home Repair Loan Disputes

Home repair loans, or home improvement loans, are often available for homeowners who need to make repairs, additions, or renovations to their home property. These types of loans usually become available after a certain amount of time after the first mortgage is drawn (usually at least a few years after the person has been living there already).

What Are Some Types of Home Repair Loan Disputes?

Some types of home repair loan disputes that frequently occur may include:

• Home repair loan fraud: Fraudulent loan tactics, such as the use of misrepresentation or deceit, can sometimes cause a dispute over the validity of the loan. These are similar to other forms of loan fraud, such as mortgage fraud.
• Non-payment of monthly loan payments: Defaulting on a home repair loan can cause problems and begin a cycle of debt that was not considered at the home’s initial purchase.
• Bankruptcy and other types of debt issues: Bad credit can sometimes hinder a person’s ability to obtain a home repair loan.
• Failure of a project: Sometimes, a home repair project can fail in the middle of the construction or repair process. For instance, if a contractor backs out, this can cause problems for the homeowner and may lead to default status on the loan.

Thus, it’s important to calculate the full amount of expenses and costs when drawing out a home repair loan. It’s also important to consider calendars and timetables for the projects so that you don’t run into issues when the loan payments start becoming due each month.

What are Secured Home Repair Loans?

According to the FDIC, a secured home repair loan is a loan that uses your house as collateral. This is often called a home equity loan or a second mortgage. The benefits of home repair loans are that you can often get a higher loan amount at a fixed rate.

You’ll also have 10 to 15 years to pay it off. However, if you default on the loan, the lender can foreclose on your home.

How Do I Know How Much I Qualify For?

The age, condition, location, size of your property, and your credit score are all factors in determining how many home repair loans you qualify for and what the interest rate will be.

What are Unsecured Home Improvement Loans?

Unsecured home repair loans are less risky for the borrower than secured home repair loans. Unsecured home improvement loans use no collateral, meaning you won’t lose your home if you default on the loan.

Unsecured home improvement loans are generally smaller than secured home repair loans and must be paid back within seven years or less. Borrowers typically pay more for these types of loans because they often have higher interest rates.

What are Home Equity Lines of Credit?

Home equity lines of credit are another option for financing a home improvement project. Home equity lines of credit act like credit cards with high limits. Once you use it, you must make monthly payments to pay off the balance.

The interest rates for home equity lines of credit are tied to the prime rate, which means that repayments can vary depending on the market conditions.

What are the Tax Implications of Home Repair Loans?

It’s important to understand what a home repair loan may mean for your taxes. Tax benefits depend on the type of home improvement loan you receive.

What Should I Do if My Loan Application is Denied?

If your application is denied, the lender must give you specific reasons or tell you that you have the right to ask why your loan was denied. You have the right to:

• Find out whether your loan is approved within 30 days of submitting your application. If your application is rejected, the lender must inform you in writing.
• Find out specific reasons why your application was rejected. The lender must give you specific reasons for the rejection or tell you that you have the right to learn the reason within 60 days. Acceptable reasons for denial include having too low of an income or too short a period of employment. Unacceptable reasons may include not meeting minimum standards. Reasons for denial must be specific.
• Learn the specific reason why you were offered less favorable terms than you applied for. For example, if a lender offers you a smaller mortgage or a higher interest rate than you applied for, you have the right to know why.
• Review the property appraisal from the lender. Mortgage applications are often turned down due to low appraisals. Check whether the appraisal contains accurate information and determine whether the appraisal considered any illegal factors in their determination, such as the racial composition of the neighborhood.

What Should I Do if I Suspect Discrimination?

If you suspect you’ve been discriminated against, consider taking action in the following ways:

• Complain to the lender. Sometimes, you may be able to persuade a lender to reconsider your application.
• Check with your state’s Attorney General’s office to see if the creditor violated any state laws. States typically have unique equal credit opportunity laws.
• Consider suing the lender in federal district court. Suppose you sue the lender in federal district court and win. In that case, you can recover your actual damages and be awarded punitive damages if the court finds that the lender’s conduct was willful and illegal. It’s also possible to recover attorney’s fees and court costs. If other people have had the same type of claim, a class action lawsuit is possible against the lender.
• Report any violations to the appropriate government agency. If your mortgage application is denied, the lender must give you the name and address of the agency to contact if you suspect any violations.

You can file complaints regarding violations of the ECOA with the Consumer Financial Protection Bureau. You can file complaints regarding violations of the FHA to the U.S. Department of Housing and Urban Development (HUD).

How Are Home Repair Loan Disputes Resolved?

Defaulting on a home repair loan can sometimes lead to legal consequences. Similar to other types of loans, the lending company might be able to reach the borrower’s other property through a lien, in order to obtain compensation for missing payments. This can have other negative consequences on the borrower, such as an impact on their credit scores.

Some home repair loan companies may be willing to work with the borrower in terms of an alternative payment plan in limited instances. They may allow for a re-working of monthly payment rates or other such alternatives. You might need to negotiate such terms with the company, which is not always an option in every case.

Do I Need a Lawyer for Help with a Home Repair Loan Dispute?

Home repair loans can be helpful and will usually improve the value of a home in the long run. In the event that you come across a legal dispute over a home repair loan, you may wish to hire a mortgage lawyer for help and advice. Your attorney can advise you of your options regarding the dispute and assist you in court if you need to make an appearance before a judge.