Home improvements vs. college savings

[Anonymous]

We're in DC, looking to buy our "forever" home - or at least from PK through high school/college for our kids.

The house we're looking at is within our budget, but will need a fair amount of work to get it to be what we want (need to re-do a kitchen, finish a basement and attic). We can borrow this money from low interest (2%) TSP loans, but in order to make the cashflow work while our youngest is in daycare, we'd probably have to forgo putting cash into 529s (currently putting about 250/month in there). We're not really aggressively saving for college yet anyway - figuring that once both kids are in school and we can free up about an extra $1k a month or so (differential between daycare now and aftercare in the future), and we'll have a lot more flexibility.

HHI is 260/year, mortgage payment will be 3600/month.

Bottom line - is building equity in our new house an acceptable tradeoff for putting money into college savings for a 1 and 3 year old?

[Anonymous]

I think it also depends on how much you are saving for retirements, esp. IRAs.

[Anonymous]

So yeah. Don't borrow from your TSP. I think that's a good strategy for a short term thing (say you need 15k unexpectedly for a down payment) or if you are near bankruptcy, but don't borrow from a TSP for home improvements! Save for those.

I would put off college savings while kids are in day care.

[Anonymous]

OP here. We're 36 years old. Have about $350K in 401ks already. We max out one every year (plus a 10k employer match), other is about $10k/yr plus a 3k employer match.

Our plan is to use the funds from the TSP to get the place into good shape, then probably do a VA cash-out refi to get the money back to pay off the loans. After that, we'll wind up with about 10% equity in the house when all is said and done, with more appreciation potential in the area.

I know it sounds like we're jumping through a lot of hoops here, but I think it all pays off in the end.

The question is: is it worth taking a few year break from contributing to our kids college savings in order to turn a 700k house into an 800-850k house that has upwards potential? I think the answer is yes, but curious what others think.

[Anonymous]

Anonymous wrote:OP here. We're 36 years old. Have about $350K in 401ks already. We max out one every year (plus a 10k employer match), other is about $10k/yr plus a 3k employer match.

Our plan is to use the funds from the TSP to get the place into good shape, then probably do a VA cash-out refi to get the money back to pay off the loans. After that, we'll wind up with about 10% equity in the house when all is said and done, with more appreciation potential in the area.

I know it sounds like we're jumping through a lot of hoops here, but I think it all pays off in the end.

The question is: is it worth taking a few year break from contributing to our kids college savings in order to turn a 700k house into an 800-850k house that has upwards potential? I think the answer is yes, but curious what others think.

Yes I would take a few years break from contributing to college. They're 1 and 3. College is a long way off and you'll have to live in that house for a long time.

[Anonymous]

Do you need to make those improvements? Or is the house livable as is? I think you shouldn't borrow from your retirement accounts to finance home improvement wants.

[Anonymous]

The house is too small sans improvements. Livable, but it will definitely lower our quality of life.

[Anonymous]

Yes, I think this is fine, if you're confident you'll make make-up payments later. You don't lose nearly as much in compound interest by using make up payments for college as you do for retirement.

[Anonymous]

You have to live in the hear and now. As someone else said, college is a long way off and a lot can happen between now and then.

There is always something you can give up in order to save for the future. Do you not go on vacations so you can put vacation money in the college savings account?

I would make your daily life as pleasant as possible and put contributions into the college fund later.

[Anonymous]

Our third and youngest child just graduated college. We started saving when they were born and never stopped. We ended up having enough money to pay for everything. Doesn't get better than that.

Bottom line, start saving now because 18 years goes by real fast. And yes, we still were able to buy a home and live a normal life!

[Anonymous]

It is ok to borrow from your TSP as long as neither of you plans to get a private sector job. But I think you are vastly underestimating the cost of redoing a kitchen and the other work. It is not just materials, licensed and insured labor is very expensive in this area. Plus you'll need to pull permits for some of that work.

[Anonymous]

I think it's fine to put off college savings while they are in daycare and you are fixing up the house.

[Anonymous]

Anonymous wrote:It is ok to borrow from your TSP as long as neither of you plans to get a private sector job. But I think you are vastly underestimating the cost of redoing a kitchen and the other work. It is not just materials, licensed and insured labor is very expensive in this area. Plus you'll need to pull permits for some of that work.

Planning for about 100k for the basement and kitchen. Attic is later, and hopefully not quite as much as the basement.

[Anonymous]

Do not borrow from your tsp. live within your means now so that you do not sacrifice your financial future. Honestly, it doesn't sound like this house is a wise financial choice.

[Anonymous]

The house is a wise financial choice because it will allow us to stay with good public schools through high school, and not have to pay care providers to shuttle our kids all over the city. In a year, we'll be priced out of the neighborhood.