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Our House Is Not Fit to Live In. Should We Borrow From 401K? – Connie

“Dear Steve,

My daughter in law bought a house in 2004 before she married my son. Her name is the only one on the deed. She bought the house with the understanding that the house was new, only to find out afterward that court records show that the owner had gotten a remodel home loan of $10,000 and had sold to her for $40,000. Sought legal advice and sent certified letter to owner about this. His brother, who did the work, came and said he would back up house but not responsible for what happens. Chose not to let him ‘repair’ it. Lawyer said they could sue, but legal fees would cost more than they could get. Called insurance company and they sent adjuster and engineer out. Claim was denied. Was going to repair, but found that most floors were rotten to foundation. Moved out in 2009 and man wanted to rent-to-buy. Late on rent almost always and finally stopped paying and moved out. When they finally did, we checked and found that water damage had c aused floors to buck and doors wouldn’t open/shut. Filed another ins. claim 2011. Same adjuster/engineer came and took almost 4 months. Finally agreed to pay around $3,000 to repair sub floors only, no joist. One building contractor had estimated damage at $10,000-$15,000. Another said he would bulldoze it down. After that claim,the ins. company cancelled ins. coverage b/c it was a homeowners loan and we weren’t living there anymore. Met with them and they were rude and unwilling to help. Went to another ins. company and took out a MS Residential policy. Sought legal counsel with another firm and got nowhere. Finally said nothing could be done due to statute of limitations with contractor and city. Payments are $356.86 (not counting ins. and city taxes) monthly. Basically are paying for small lot for 30 years. Would like to build a house fit to live in, but cannot afford to keep paying this with other living expenses. Currently living in a mobile home. Considering borrowing from 401K to pay off.

Should they borrow from 401K to pay off a house that is not fit to live in and would still have to borrow enough to repair home or let it continue to deteriorate or call the loan holder and let the home go back unless they make a very good offer. Wouldn’t the bank rather get something, rather than nothing out of this?


Dear Connie,

I need some additional information first.

How much do you have in your 401K?

How much do you need to borrow?

What assets do you currently have?

How old are you?

How much can you repay into your 401K loan each year?

Please post your responses and follow-up messages to me on this in the comments section below.


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About the author

Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

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