how do you pay for house projects (big ones)?

[Anonymous]

Speak to me like a child so that I understand. We want to build a sunroom. I think it will likely be around 65K. Do we: save for it for a few years and pay for it outright, use the financing offered by the sunroom company, or somehow use the equity in our house to get a loan? Our house has doubled in value in the past 3 years since we bought it, if that matters. The only debt we have is the mortgage.

I am really good at saving money (I just mean that it is a comfortable way for me to get things paid for). I am not good at considering other options and getting creative with how to get this project done (like using a short-term investment account or something else).

I don't think we need to do this project for about 2 or 3 years, so we have time.

[Anonymous]

I think the financing offered by the sunroom company is probably the worst option.

If you don't have to do it for a few years and you're good at saving, then go ahead and save, then pay cash. No reason to pay $100k for a $65k sunroom.

[Anonymous]

We are doing a HELOC.

[Anonymous]

We just got quoted $12k for a project we'd like to do, and we are gong to just try to save up for it so we can pay cash.

It's a would-like, not a must-do - but I would really like to do it. (Fixing a terrible looking ceiling installed by the previous owners.)

We redid our kitchen last year by refinancing and taking out some of the money.

[Anonymous]

Either save to pay for it with cash, or take out a heloc, or do a combination of both. The process to get a home equity line of credit (HELOC) is fairly straightforward. You contact your existing mortgage broker and ask for one. Alternately, if the interest rate on your mortgage is lower than what they are offering on a HELOC you can do what's called a cash out refinance, where you increase your mortgage by however much cash you need and get that amount of cash back. I'm not sure what the fees are of the relative lending choices so you would have to weigh your options there (I believe it costs more to do a refi).

My guess is you don't want to use the financing offered by the sunroom company as it typically will cost more to go through them for financing.

[Anonymous]

Figure out what it will cost you to finance the sunroom, and then make your decision. $65K becomes a lot more with interest.
Then decide if it's worth it to wait a few years and pay cash.
And of course, you should have all your finances I shape before doing this - emergency fund, retirement, college savings if needed.

[Anonymous]

We save and pay cash.

[Anonymous]

Anonymous wrote:We save and pay cash.

Same here. We wouldn’t feel comfortable taking loans for something that is a nice to have, not need to have.

[Anonymous]

It all comes down to interest rate and how quickly you want it done.

You can save - pay with cash. Cheapest option
You can take out a Secured loan (either against your savings or your 401k) - Usually about 3% interest
You can take out a HELOC (usually 1% above your current mortgage rate).
You can take out financing or a personal loan (usually about 8%+ interest).

[Anonymous]

We have a revolving line of credit at a low rate through a private banking relationship. We're paying that way. We could pay cash but at a super low rate it makes more sense to finance and keep the money invested, plus we would have to cash out securities to actually pay out of pocket and that would involve a large tax bill.

[Anonymous]

We've paid cash and used 0% credit cards (paid off in full before the promo period ends). In your situation, I'd save and pay cash.

[Anonymous]

If <$20k, we’ll pay credit cards if possible to take advantage of sign up bonuses

[Anonymous]

We did one with cash. Another we did a cash out refinance and ended up paying less per month on the mortgage than before and did not extend the term of the loan, but had enough cash for a big renovation.

For a $65K job, we'd do cash.

[Anonymous]

I would not be afraid of taking out a HELOC now, assuming you intend to pay it back over 5 years or less. There is real value in being able to enjoy your sunroom now rather than having to save for another five years, and interest rates are very low.

[Anonymous]

Most people I talk to do a HELOC or cash out refi. And these are UMC people.

And that's the reason I'll never get a fancy remodel. DH refuses to borrow the money, yet he plows all our excess cash into retirement. He says I'll thank him one day and he's right but in the meantime I have old ugly kitchen and baths while everyone around me is renovating away. Sigh.