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

[Anonymous]

Open up a spreadsheet and calculate the total cost of each option, then decide.

[Anonymous]

We’ve done both a home equity loan and a cash out refinance.

[Anonymous]

Anonymous wrote: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).

Companies have been offering 0% interest loans for 3 years.

[Anonymous]

Anonymous wrote: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.

He thinks the money for a kitchen will prevent you from retiring? I couldn't live with someone with that financial mindset.

[Anonymous]

I’d finance. If you wait till you have saved enough costs may also keep rising.

[Anonymous]

Not OP but can someone explain to me (like a child) how a HELOC works?

Let's say we bought a house last year for $800k and want to do $100k of work. Now what?

[Anonymous]

Anonymous wrote: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.

This is the exact same thing I am going through with my DH. Ugh!

[Anonymous]

Anonymous wrote: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.

We have paid cash for our most recent bathroom remodel. It was about 11k. I really want to do our kitchen and know there’s no way I plan to wait 5 years to save up for it. Will probably finance it in some way.

[Anonymous]

We are working on a pool/outdoor space project. Combination of cash saved + a HELOC.

[Anonymous]

We also do a combination of cash + HELOC. Rates on the HELOC are really good.

[Anonymous]

Anonymous wrote:Not OP but can someone explain to me (like a child) how a HELOC works?

Let's say we bought a house last year for $800k and want to do $100k of work. Now what?

I think you can shop around, but we just went to our mortgage lender and asked what they could do for us. They waived the appraisal and the associated fees, but that's where the process starts. They need to make sure there is sufficient equity in the house such that you qualify for a HELOC and how big the line will be. Once you move forward, you sign a bunch of documents just like you did when you got a mortgage. You get a checkbook where you can draw from the line, but you can also do it via online transfers. Then you pay interest on the balance that you have drawn from the line, or you can pay it back. If you sell the house, you'll obviously have to pay the balance back at closing.

[Anonymous]

Anonymous wrote: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.

The folks we bought our house from saved up for many years to add a beautiful master bedroom/bathroom addition to the first floor of the house. Husband was supposedly pretty frugal and they didn’t renovate unless it was necessary. Three weeks after that addition was put in, he walked outside and died of a stroke on the driveway. The wife now lives in a lovely brand new construction home, her son told us the entire story after we purchased the house.

Save money for retirement but enjoy your life too, you never know how long you have.

[Anonymous]

Anonymous wrote:

Anonymous wrote: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).

Companies have been offering 0% interest loans for 3 years.

What companies??!

[Anonymous]

If you didn't pay cash, what would you do with the money?

We're looking at about $50-60 in work on our house. We have the cash, but the performance on our investments is significantly higher than a HELOC. So we're going to invest the cash and do a loan. But, if you won't invest the cash or don't have an easy investment vehicle, I would just use the cash.

[Anonymous]

DH is also opposed to debt. We're planning a variety of updates (including a sunroom) after we're done paying for daycare next year and will be paying cash. In the meantime, I have most of our savings in a Vanguard index fund (VTI) to grow it as much as possible, understanding that I'll pay tax on the gains when I pull it out.