Really struggling with whether to take out loan for home improvement

[Anonymous]

So we are in a great place financially right now. We bought a house under budget in the neighborhood we want. We got a great rate and the mortgage payment is about 1/3 of each of our individual salaries. We are saving toward retirement and a nest egg- but only have about $20k in that since the purchase of our house and the urgent repairs we needed to do when we moved in (there were a lot!). Anyway the house still could use a lot of work- floor cracking in kitchen, damaged counters, crack in bathroom/settling bathtub, poorly insulated areas, hardwood floor everywhere needs repair and refinishing. So there's all that, and then there are layout changes we'd like to make if we're doing all this work anyway. We're looking at $150-$200k renovation. Now we bought at least $150k less than the updated homes on our block are going for so for resale I think it's ok. We plan to be here forever, at a minimum 6-7 more years. I know the financially responsible thing to do is save and wait and that's what I'm leaning towards but DH is a little more aggressive. I know we could pay down the loan - like $1300/month 20 yr fixed but I hate the thought of being tethered into that! Thoughts?

[Anonymous]

Is there a way to take out a loan with a shorter term than 20 years?

[Anonymous]

Are you looking at a construction loan or HELOC?

I'd probably bite the bullet and do it now while interest rates are still low plus then you get to enjoy all the benefits of the improvements for a longer time.

[Anonymous]

Anonymous wrote:Is there a way to take out a loan with a shorter term than 20 years?

Oh yes, we have a bunch of options on the table. That seemed to be the best combination of rates/total loan/monthly payment that we have found. We could swing a 10yr but payments (obvs) steeper. We currently have children costs - 3-4 more years of that then we'd probably start more aggressively paying down the loan.

[Anonymous]

Anonymous wrote:Are you looking at a construction loan or HELOC?

I'd probably bite the bullet and do it now while interest rates are still low plus then you get to enjoy all the benefits of the improvements for a longer time.

Could do either but I'd prefer a fixed (albeit higher) rate.

[Anonymous]

I would save more and do it slower. If you can pay down the loan at $1300 a month, why not save that? $1300 a month for 20 years is a lot.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Is there a way to take out a loan with a shorter term than 20 years?

Oh yes, we have a bunch of options on the table. That seemed to be the best combination of rates/total loan/monthly payment that we have found. We could swing a 10yr but payments (obvs) steeper. We currently have children costs - 3-4 more years of that then we'd probably start more aggressively paying down the loan.

Child care- not children costs! Those don't go away when they enter school, do they ?

[Anonymous]

$150-200 is a lot. Are you adding any square footage or just redoing existing space? If an addition I could see the comps supporting this kind of renovation.

Is it possible to do your renovations in phases and pay as you go? Or put off the major reno until your childcare costs go down? It's a tough call because like PP said, interest rates aren't going anywhere but up.

[Anonymous]

Anonymous wrote:I would save more and do it slower. If you can pay down the loan at $1300 a month, why not save that? $1300 a month for 20 years is a lot.

Most people sell refi or sell way before. The heloc interest is fully deductible

[Anonymous]

Anonymous wrote:$150-200 is a lot. Are you adding any square footage or just redoing existing space? If an addition I could see the comps supporting this kind of renovation.

Is it possible to do your renovations in phases and pay as you go? Or put off the major reno until your childcare costs go down? It's a tough call because like PP said, interest rates aren't going anywhere but up.

No addition but it's a rowhouse (end unit) one of the bigger ones in the neighborhood already- so comps are based on the same sq footage. The estimates include adding a master bath. Basically the layout changes include adding the bathroom and restoring walls that previous owners took down - ex they turned a 3 bed into a 2 bed. So for comps we would like to get into the 3/3 category. I'm glad to see though that there is not unanimous opposition to the idea. My real life advisors (family) consist of unrealistic extremism on both sides

[Anonymous]

Anonymous wrote:

Anonymous wrote:$150-200 is a lot. Are you adding any square footage or just redoing existing space? If an addition I could see the comps supporting this kind of renovation.

Is it possible to do your renovations in phases and pay as you go? Or put off the major reno until your childcare costs go down? It's a tough call because like PP said, interest rates aren't going anywhere but up.

No addition but it's a rowhouse (end unit) one of the bigger ones in the neighborhood already- so comps are based on the same sq footage. The estimates include adding a master bath. Basically the layout changes include adding the bathroom and restoring walls that previous owners took down - ex they turned a 3 bed into a 2 bed. So for comps we would like to get into the 3/3 category. I'm glad to see though that there is not unanimous opposition to the idea. My real life advisors (family) consist of unrealistic extremism on both sides

What neighborhood are you in? 2br to 3br + a bath will definitely be nicer for your family and for resale. Are you also redoing the kitchen etc? If just a bedroom layout change + master bath I would think you're more in the 50-70k range.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:$150-200 is a lot. Are you adding any square footage or just redoing existing space? If an addition I could see the comps supporting this kind of renovation.

Is it possible to do your renovations in phases and pay as you go? Or put off the major reno until your childcare costs go down? It's a tough call because like PP said, interest rates aren't going anywhere but up.

No addition but it's a rowhouse (end unit) one of the bigger ones in the neighborhood already- so comps are based on the same sq footage. The estimates include adding a master bath. Basically the layout changes include adding the bathroom and restoring walls that previous owners took down - ex they turned a 3 bed into a 2 bed. So for comps we would like to get into the 3/3 category. I'm glad to see though that there is not unanimous opposition to the idea. My real life advisors (family) consist of unrealistic extremism on both sides

What neighborhood are you in? 2br to 3br + a bath will definitely be nicer for your family and for resale. Are you also redoing the kitchen etc? If just a bedroom layout change + master bath I would think you're more in the 50-70k range.

Glover Park DC. Kitchen needs to be re-done completely. The only gd wall they left up was on the galley kitchen, so we'd love to open that up for a breakfast bar. The estimates we got include a lot of incidental work, plus completely re-doing the current bathroom. It seems nuts that it got that high, but that's what we're hearing (we're still collecting estimates.) And yes, it would be a big quality of life improvement for us. Can't tell if I just want instant gratification or if it's really a good idea though. The interest rates rising is relevant though.

[Anonymous]

Why did you buy a broke down shit shack ? Did you not figure all this out before you bought ? You had to know you would need all these things done.

[Anonymous]

Anonymous wrote:Why did you buy a broke down shit shack ? Did you not figure all this out before you bought ? You had to know you would need all these things done.

Yes, yes I did. Well not every last thing, but still we knew *what* we were doing. We didn't quite know how painful it might all be but that's life. I'm not on here bitching about my situation, just trying to make a reasoned decision. Thanks for your helpful contribution to that .

[Anonymous]

Do you have pets with your kids?
they suck up your money and ruin everything you do to your house.
don't worry about the hardwoods with the kids or pets, it will be money out the window.
Insulation, makes sense to fix.
Also, since it's only 4-5 years with childcare costs I'm assuming you don't have elementary aged kids (vs 4-5 year and having college costs!).
Wait till the kids are in school. Most kid stuff hits the fan in the early years - speech therapy, OT - stuff like that.
Then you also have all the kid crap out of the house.