HELOC or suck it up and save up??

[Anonymous]

We want to make some home improvement (re-do kitchen, add half bath), and estimates put this around $75k. We have $20k saved for this purpose so far. Should we take out a HELOC, or do we have to suck it up and save the rest?

Some relevant details:

Net pay: $6,000/month
Mortage (PITI): $950/month
Other expenses: $3000/month on average (although we could tighten this up a bit)
No other debt.
House value $450k / we owe $150k

I'm pretty conservative, and even I think we should just go ahead and get the HELOC. But I'm curious what others think.

[Anonymous]

I am so incredibly envious of your mortgage that I can't get past it. Amazing!

[Anonymous]

Anonymous wrote:I am so incredibly envious of your mortgage that I can't get past it. Amazing!

We were the rare people that benefited from the lending rules of the boom times. We bought a $250k house with 5% down, got a mortgage for 80% and a heloc for 15% of the price. We have since paid off the 15%, and our HHI has more than doubled (in retrospect, we were overextended when we bought the place, but miraculously lived to tell the tale). Now house is valued at $450, and we are reluctant to move elsewhere in DC because our mortgage would more than double. Hence we're going to do some serious renovations to make this house what we want it to be.

[Anonymous]

You situation isn't typical. I suggest you go ahead with the HELOC based on your posts.

[Anonymous]

Anonymous wrote:You situation isn't typical. I suggest you go ahead with the HELOC based on your posts.

Thanks so much. I know we're very lucky. Just trying to make the best borrowing/spending decisions, because our salaries are probably (near) topped out now. I was thinking that being able to take the deduction would be good.

[Anonymous]

75k is very high. I would do the HELOC or the Home Equity loan but it depends on our HHI.

[Anonymous]

Can you refi and move it to your mortgage...cash out In other words. Depending in your rate, you may be able to get close to your current payment.

[Anonymous]

Anonymous wrote:Can you refi and move it to your mortgage...cash out In other words. Depending in your rate, you may be able to get close to your current payment.

Although why would I pay a few grand to refi, and then refinance these renovations for 30 years when I could easily pay them off in 15? I'm not trying to be snarky - I'm genuinely trying to see if I'm missing an upside.

[Anonymous]

Anonymous wrote:75k is very high. I would do the HELOC or the Home Equity loan but it depends on our HHI.

HHI is $160k

[Anonymous]

I would do the HELOC. I'm very conservative but we just did a renovation funded by a HELOC b/c I wanted to enjoy my house now. I'm glad I did. Had savings in other areas that are more than adequate but that I wasn't willing to draw down on, so I didn't feel irresponsible doing so.

[Anonymous]

I did a HELOC because the rate was very, very low (under 3%) and I could easily make payments of $1,000/month until the loan (about $30K for me) was paid off. I wanted to live with the new kitchen and baths while I paid them off, not wait for them. Ended up paying off the rest of the loan when I sold the house, which sold quickly because of the updates.