NP here. Also talk to me like a child.

With a heloc
1. Am I refinancing my entire current mortgage? If I’m dipping into my equity… how does this relate to my current 30y mortgage (of which I have half paid off)

2. Is it the worst time to do this?? Rates?? What advice do you have for unacceptable rates—what rates would you walk away from?

Anonymous wrote:

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.

The stress of writing the check probably killed him.

Anonymous wrote:We save and pay cash.

This. We're putting in a pool and an entire backyard and front patio. We are paying cash.

Bumping this thread, but since rates have changed so much i'm wondering what is advised today rather than a year ago.

I'm looking at a 85K-150K reno (depending on several factors) that I would prefer to finance rather than pay in cash. What are my options? I could pay cash, but I would rather not.

Anonymous wrote:

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.

The poster asked what is a HELOC.

A bank will give you a line of credit for some chunk of your home equity. Ideally, your mortgage+HELOC is under 80% of the value of your home.

During the "draw" period (often 10 years) you can write a check to spend money from the HELOC (we usually write a check and drop it into an account). When you have a balance, you'll have a monthly payment similar to a mortgage. The "repayment" period is often 15 years versus the 10 year draw period. Interest is usually variable.

If you are doing a big project, you could get what i think is called a fixed rate advance -- essentially a loan from the fund with a fixed interest rate. You'd negotiate those terms separately, and as you pay back principal it goes back into the main HELOC to be potentially tapped as needed.

For us, we have an $80K fund. We initially got a fixed rate advance for the whole amount, and set it up to pay interest only while the project was going on, so we'd keep our extra cash for overages. When the project finished we realized that a) our current interest rate was higher on the fixed rate advance than the variable rates and b) we had plenty of cash to pay it off as we went. We paid back about $65K in a year, and then tapped it again for a new furnace/A/C. We have again about $50K to tap if we need it.

If used for home improvement, interest is tax deductible.

Hope this helps!

Anonymous wrote:We are doing a HELOC.

+1. Flexible paying it back, can tap it again if needed. We used it last year for a basement, and then have paid back more than half this year. If you're a good saver this is a great option, since you'll spend the money now, and pay it back with what you'd save to do it.

Anonymous wrote:

Anonymous wrote:

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!

Think about how glad you will be to retire a bit earlier than your friends who will have to work longer/more to pay off debt. This happens just at the point when you can’t take your health and energy for granted in your 50s and 60s and are also hit with tuition bills. And menopause. Believe me, your husband is right.

Lol. Penny wise and pound foolish. You can retire at a good age AND have a nice kitchen. It’s not like folks are looking to pillage their retirement accounts to fund private college for 3 kids. Besides, it’s a math exercise - model out what the current retirement numbers look like and plug in a kitchen remodel either via HELOC or cash and redo the retirement numbers.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

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!

Think about how glad you will be to retire a bit earlier than your friends who will have to work longer/more to pay off debt. This happens just at the point when you can’t take your health and energy for granted in your 50s and 60s and are also hit with tuition bills. And menopause. Believe me, your husband is right.

You think people in this area are significantly delaying retirement because they updated their kitchens? Why are you not factoring updating your home and its maintenance with your home purchase? Why would you willingly live in a home that makes you unhappy for 30 years if you didn't have to?

+1 It sounds like the PP you're responding to is being penny wise and pound foolish. After all, the kitchen will need to be renovated before selling. Why would you do something for a new buyer that you won't do for yourself. Life is too short. Live in a way that is comfortable for you. And it is crazy that the PP thinks that people in their 50s and 60s don't have the "health and energy" and "menopause" and "tuition bills" to deal with a reno. Sheesh.

Seriously, I’m in my 50’s and kids’ tuition is being paid from their fully funded 529’s which we saved from birth, and we’re thin and athletic and don’t have health problems. We pay for home renovations from cash as needed. We can retire anytime we want and want to live in a house that is just right for us. Spent too many years too busy and too poor to cate and now we have money and time and no young kids running around messing things up.

We paid cash for our 60k project. We paid part cash and part HELOC for our 300k reno.

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.

The interest rate is key. You never pay cash for something when your cash can earn more in the market. We just bought a car and got 0% interest. No way we were paying cash. We can afford to pay it off at any other time.

Get a line of credit from the bank for home improvement projects. $5k, $10k, $20k -- whatever you need and can qualify for. Then you pay it off like a credit card payment every month. That's what we did and it worked very well.

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

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!

Think about how glad you will be to retire a bit earlier than your friends who will have to work longer/more to pay off debt. This happens just at the point when you can’t take your health and energy for granted in your 50s and 60s and are also hit with tuition bills. And menopause. Believe me, your husband is right.

You think people in this area are significantly delaying retirement because they updated their kitchens? Why are you not factoring updating your home and its maintenance with your home purchase? Why would you willingly live in a home that makes you unhappy for 30 years if you didn't have to?

+1 It sounds like the PP you're responding to is being penny wise and pound foolish. After all, the kitchen will need to be renovated before selling. Why would you do something for a new buyer that you won't do for yourself. Life is too short. Live in a way that is comfortable for you. And it is crazy that the PP thinks that people in their 50s and 60s don't have the "health and energy" and "menopause" and "tuition bills" to deal with a reno. Sheesh.

Massive reno/gut job, HELOC ($300,000) that we paid off in 15 years. $100,000 that we added a new screened in room during Covid and did entirely new landscaping, we paid in cash.

To the PP, this has not/will not affect retirement or amount left to our 3 children after we pass. We realize we are blessed and very fortunate in this regard.

Anonymous wrote:We’ve always saved and paid cash. Over 30 years of owning this house (mortgage is paid off now), we’ve put in a 2-story $110K addition, a smaller $28K addition, and a $125K kitchen/master bed/master bath addition. All cash. We’ve also saved money by DYI where we can (e.g., DH built our large deck, fire pit, various furniture, etc.).

Omg, wasn’t it a nightmare to go through the process of adding an addition 3 times?? That makes no sense to me. Did you have an architect plot them all out at the beginning?

Anonymous wrote:

Anonymous wrote:

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!

Think about how glad you will be to retire a bit earlier than your friends who will have to work longer/more to pay off debt. This happens just at the point when you can’t take your health and energy for granted in your 50s and 60s and are also hit with tuition bills. And menopause. Believe me, your husband is right.

You think people in this area are significantly delaying retirement because they updated their kitchens? Why are you not factoring updating your home and its maintenance with your home purchase? Why would you willingly live in a home that makes you unhappy for 30 years if you didn't have to?