What is the smartest way to pay for a home remodeling project?

[Anonymous]

Assuming, of course, that it is smart to remodel in the first place.

If you have saved 100k for a project, is it wise to pay for the whole project in cash (not up front, obviously)? Or are you better off getting a HELOC and then paying it off that off in installments? It just seems like a lot of $ to throw at something. I'm curious to hear how others have funded their renovations.

[Anonymous]

seems like a lot of $ to throw at something

It is. From savings or borrowed, doesn't matter. The answer to your question, from me, anyway, would depend on the terms of the HELOC. How much is the borrowed money going to cost?

[Anonymous]

I paid off my last home improvement project ($30K) with a home equity line of credit because I didn't have the cash on hand, but knew that I'd be selling my house for $200K more than I paid for it, so it was a no-brainer. Plus the interest rate was super-low so i paid very little interest.

How much interest is your $100K making for you right now? What's the rate on a HELOC right now? if you're making 6% on your investments and you can find a 3% HELOC that has tax deductible interest, go for it

[Anonymous]

Anonymous wrote:Assuming, of course, that it is smart to remodel in the first place.

If you have saved 100k for a project, is it wise to pay for the whole project in cash (not up front, obviously)? Or are you better off getting a HELOC and then paying it off that off in installments? It just seems like a lot of $ to throw at something. I'm curious to hear how others have funded their renovations.

You only take a loan when the interest rate on the loan is lower than the interest rate that you can earn on the money. Otherwise, you are paying someone money to lend you money that you already have. Most people who take out HE loans or use HELOC either do not have the money to put cash down. There are some few who have some investment vehicle that pays out more than the interest rate on the loan, but these are the significant minority.

[Anonymous]

We did both - used a lot of cash but also used a HELOC which we are paying off over about 3 years. Almost done with it in fact. We had more cash but didn't want to have all our cash tied up in a largely non-liquid asset so we kept a pretty big cushion. We have paid the HELOC off quickly enough that the interest cost (which was low) wasn't too much and it forced us to budget to pay off the HELOC out of cash flow. We had $150k in the HELOC and paid anywhere from $2-10k per month to pay it down.