Anonymous
Post 02/27/2014 12:58     Subject: Help me explain this to my husband
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:Why is my DH risk adverse? I guess it's because it's all he knows. We have investments, we have cash. But he is always worried about what could happen if he loses his job, if the dollar crashes, etc.

I agree that I need a better idea of our finances. I bet with a clearer picture I could show him how our renos can be done without too much stress.



Yes, you do need a better idea of your finances. Money doesn't grow on trees - your DH really could lose his job tomorrow in a layoff. Of course, maybe he is very much in demand because he works in a specialized niche field, or is a superstar at what he does - even those people are finding it hard to find new work.


It sounds like they have hundreds of thousands in their emergency fund.
Anonymous
Post 02/27/2014 12:39     Subject: Help me explain this to my husband
Anonymous wrote:
Anonymous wrote:Why is my DH risk adverse? I guess it's because it's all he knows. We have investments, we have cash. But he is always worried about what could happen if he loses his job, if the dollar crashes, etc.

I agree that I need a better idea of our finances. I bet with a clearer picture I could show him how our renos can be done without too much stress.



Yes, you do need a better idea of your finances. Money doesn't grow on trees - your DH really could lose his job tomorrow in a layoff. Of course, maybe he is very much in demand because he works in a specialized niche field, or is a superstar at what he does - even those people are finding it hard to find new work.
Anonymous
Post 02/26/2014 18:18     Subject: Help me explain this to my husband
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:If it takes you 10 years to save up $100k, it will take you a lot longer than that to pay off a $100k loan. I would save more aggressively for the renovations ($100k in 5 years seems doable) and try to do the renovations part at a time.


I agree. I wouldn't do any renovations that I couldn't pay for out of pocket. I sure as hell wouldn't do any renovations that would take me 10+ years to pay for. Live within your means.


This is ridiculous. Do you believe that everyone must pay cash for their house? Renovations are as much an investment as the original purchase price is.


No, I don't believe that. The difference is that everyone needs a place to live. No one *needs* a kitchen bump out.

By your reasoning, you should *always* have a loan against your home. Finished your mortgage? Take a home equity loan and invest the difference! Brilliant!

By the time she finishes paying for her renovations (10+ years after they take place), it will be time for new renovations.


No -- by your reasoning, no one would own anything more than a basic shelter, because no one *needs* a $900k house. And I am not suggesting that one should always borrow against their home for spending money. However, if someone came on this board and said "I make $130,000 a year. Can I afford a $100,000 mortgage?" Everyone would say "Of course!" However, on this thread, everyone seems to get all wrapped up in the fact that they own a $900,000 house free and clear. Personally, I think it's jealousy talking.Would you say that someone making $130,000 a year shouldn't buy a $100,000 house because they should wait ten years until they've saved the $100,000?If they take out a $100,000 loan, spend it to upgrade the House, they'll have a million dollar house with a $100,000 mortgage, which they can afford (unless there's something about their finances I don't know). Put another way, would you feel differently if they had taken out a small mortgage when they bought the house and saved some of the inheritance for renovations?

Further, if you've tried to sell a house in that price range lately, you'd know that you end up having a give a fairly significant discount when you sell a home that has not been recently renovated. People who buy million dollar homes generally do NOT want a "fixer upper." One reason is the hassle of living through the renovations, the other is the difficulty with coming up with the cash in a time when home equity loans are difficult to come by. The OP is lucky enough to have plenty of equity in their home -- if they are willing to live through a renovation, they will get to enjoy a more pleasant and spacious home, and, if they choose to sell, they'll have improved the marketability and value of their house. Maybe it's not what you would do, but I get the feeling that you don't live in a $900,000 house with no mortgage.


Whatever. She asked for advice. Most people said that she shouldn't do it. I don't care what happens.
Anonymous
Post 02/25/2014 23:38     Subject: Help me explain this to my husband
Just b/c you put in 100k in renovations does not automatically mean that the house value rises by 100k. Some renovations add more value (like kitchens) than others but you never get 100% back.
Anonymous
Post 02/25/2014 23:14     Subject: Help me explain this to my husband
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:If it takes you 10 years to save up $100k, it will take you a lot longer than that to pay off a $100k loan. I would save more aggressively for the renovations ($100k in 5 years seems doable) and try to do the renovations part at a time.


I agree. I wouldn't do any renovations that I couldn't pay for out of pocket. I sure as hell wouldn't do any renovations that would take me 10+ years to pay for. Live within your means.


This is ridiculous. Do you believe that everyone must pay cash for their house? Renovations are as much an investment as the original purchase price is.


No, I don't believe that. The difference is that everyone needs a place to live. No one *needs* a kitchen bump out.

By your reasoning, you should *always* have a loan against your home. Finished your mortgage? Take a home equity loan and invest the difference! Brilliant!

By the time she finishes paying for her renovations (10+ years after they take place), it will be time for new renovations.


No -- by your reasoning, no one would own anything more than a basic shelter, because no one *needs* a $900k house. And I am not suggesting that one should always borrow against their home for spending money. However, if someone came on this board and said "I make $130,000 a year. Can I afford a $100,000 mortgage?" Everyone would say "Of course!" However, on this thread, everyone seems to get all wrapped up in the fact that they own a $900,000 house free and clear. Personally, I think it's jealousy talking.Would you say that someone making $130,000 a year shouldn't buy a $100,000 house because they should wait ten years until they've saved the $100,000?If they take out a $100,000 loan, spend it to upgrade the House, they'll have a million dollar house with a $100,000 mortgage, which they can afford (unless there's something about their finances I don't know). Put another way, would you feel differently if they had taken out a small mortgage when they bought the house and saved some of the inheritance for renovations?

Further, if you've tried to sell a house in that price range lately, you'd know that you end up having a give a fairly significant discount when you sell a home that has not been recently renovated. People who buy million dollar homes generally do NOT want a "fixer upper." One reason is the hassle of living through the renovations, the other is the difficulty with coming up with the cash in a time when home equity loans are difficult to come by. The OP is lucky enough to have plenty of equity in their home -- if they are willing to live through a renovation, they will get to enjoy a more pleasant and spacious home, and, if they choose to sell, they'll have improved the marketability and value of their house. Maybe it's not what you would do, but I get the feeling that you don't live in a $900,000 house with no mortgage.
Anonymous
Post 02/25/2014 17:47     Subject: Help me explain this to my husband
Anonymous wrote:
Anonymous wrote:
Anonymous wrote:If it takes you 10 years to save up $100k, it will take you a lot longer than that to pay off a $100k loan. I would save more aggressively for the renovations ($100k in 5 years seems doable) and try to do the renovations part at a time.


I agree. I wouldn't do any renovations that I couldn't pay for out of pocket. I sure as hell wouldn't do any renovations that would take me 10+ years to pay for. Live within your means.


This is ridiculous. Do you believe that everyone must pay cash for their house? Renovations are as much an investment as the original purchase price is.


No, I don't believe that. The difference is that everyone needs a place to live. No one *needs* a kitchen bump out.

By your reasoning, you should *always* have a loan against your home. Finished your mortgage? Take a home equity loan and invest the difference! Brilliant!

By the time she finishes paying for her renovations (10+ years after they take place), it will be time for new renovations.
Anonymous
Post 02/25/2014 12:48     Subject: Help me explain this to my husband
I'd also go one step farther back and ask why DH felt the need to plow the entire $900k into the house--were there never any thoughts of needing to do these renovations when you were looking at the house?

Getting a mortgage for even a small portion of the total cost while having liquid funds available for the renovations--and then getting the mortgage interest deduction to boot--would have been a good way to go. But too late!

Anonymous
Post 02/25/2014 07:34     Subject: Help me explain this to my husband
Anonymous wrote:
Anonymous wrote:Your house should never be collateral for anything other than a mortgage.


But this is, in effect, a mortgage. If the money is used to renovate the house, it will increase the home's value and marketability. They will have a $100k mortgage on a million dollar house vs. owning a $900k house free and clear. They'll pay interest, but otherwise, it's a wash. It's not like they're blowing it on a vacation or even a depreciating asset like a car.


This was in response to the people who use a Heloc to buy cars.
Anonymous
Post 02/25/2014 07:02     Subject: Help me explain this to my husband
Thank you pp. As I said, we bought the fixer upper in a $1.2-1.6m neighborhood. I am confident that we will get the money back when we sell (hopefully in many many years).
Anonymous
Post 02/24/2014 22:54     Subject: Help me explain this to my husband
Anonymous wrote:
Anonymous wrote:If it takes you 10 years to save up $100k, it will take you a lot longer than that to pay off a $100k loan. I would save more aggressively for the renovations ($100k in 5 years seems doable) and try to do the renovations part at a time.


I agree. I wouldn't do any renovations that I couldn't pay for out of pocket. I sure as hell wouldn't do any renovations that would take me 10+ years to pay for. Live within your means.


This is ridiculous. Do you believe that everyone must pay cash for their house? Renovations are as much an investment as the original purchase price is.
Anonymous
Post 02/24/2014 22:50     Subject: Help me explain this to my husband
Anonymous wrote:Your house should never be collateral for anything other than a mortgage.


But this is, in effect, a mortgage. If the money is used to renovate the house, it will increase the home's value and marketability. They will have a $100k mortgage on a million dollar house vs. owning a $900k house free and clear. They'll pay interest, but otherwise, it's a wash. It's not like they're blowing it on a vacation or even a depreciating asset like a car.
Anonymous
Post 02/24/2014 15:45     Subject: Help me explain this to my husband
Anonymous wrote:Why is my DH risk adverse? I guess it's because it's all he knows. We have investments, we have cash. But he is always worried about what could happen if he loses his job, if the dollar crashes, etc.

I agree that I need a better idea of our finances. I bet with a clearer picture I could show him how our renos can be done without too much stress.


Pardon me, but your last two sentences are a study in cognitive dissonance and putting the cart before the horse.

You don't have much of a clue what your finances are. Therefore, you cannot possibly even begin to guess or know whether and how with a clearer picture, you could show him the renos can be done without too much stress.

You're putting your projections and desires way ahead of the facts. Get the facts first. Look at them with a skeptical, analytical and open mind. Then see what the picture looks like.