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Dear Liz:
I am a retired senior, age 68, who owes $30,000 with a 6.5% fixed rate (from 1988) on my home, which is worth over $1 million. Unfortunately, I had some serious problems and my credit scores are in the 589 to 600 range. The bank that has my mortgage just declined my application for an equity loan for needed repairs to my home. Please advise.
— Dottie

Dear Dottie,
You don’t mention whether you have savings or investment accounts you could tap to pay for these repairs. If you don’t have these options, or you do but the repairs would eat up most of their value, then you’re in the classic but unfortunate position of being “house-rich and cash-poor.”

People who are in a rush to pay off their mortgages often don’t consider what it might be like to be in your situation, and how much better off they would be with more savings or investments rather than equity that they can’t easily tap.

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You have a few options. If the repairs can wait a few months, and your financial situation has stabilized so that you can pay your bills, you may be able to get your credit scores up to acceptable levels. What’s acceptable depends on the lender, but paying down any credit card balances and not skipping payments can go a long way toward rehabilitating your scores.

Keys to the best FICO credit score | Cartoon: artenot/; Balloons: Anita Ponne/

You also could consider a reverse mortgage. These loans allow you to tap your equity without having to pay the money back. The loan and accrued interest are repaid when you die, sell or otherwise permanently move out of the house. Reverse mortgage lenders typically don’t check your credit, but you would have to prove your ability to pay other home-related costs such as insurance and property taxes.

If your income is low enough, you may be able to apply for federal or state grants to pay for repairs, or find a volunteer agency in your neighborhood that’s willing to do the work for free.

Finally, you could sell your home “as is” and use the equity to downsize into more a more affordable home.

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