Should I get an home equity loan or should I save my money and pay with cash?
I want to do some remodeling in my house like a new kitchen, all new travertine floors, new doors and some other things.
The total of my remodeling will be about $45,000 including all the labor and materials.
My question is: Do I get a home equity loan for 7% to8% or do I save my extra cash and pay for the remodeling in full in about 2-3 years after I pay off my house?
If I get a home equity loan for about 5 years, I will pay nearly $10,000 in interest alone. That’s a lot of money!
Any ideas?
P.S. I have no debt except my house loan. No credit cards, no cars, no school loans, no nothing!I have a credit score of 780 and I don't like to pay interest if I don't have to!
One plus with the loan is that you get to write off your interest on your taxes. That could bump you into a better tax bracket and actually save you more $$.
I would get the home equity loan and pay it off early. That way you can get it done now.
Dig this!!! Apply for some grants ! they are out there waiting for you to apply.!
IT DEPENDS IF YOU WANT THE WORK DONE NOW OR LATER. THERE ARE A FEW DIFFERENT AVENUES YOU COULD TAKE YOU COULD GET A AJUSTABLE RATE AND IT WOULD BE LOWER% THEN A FIXED. I WOULD LET THE EQUITY IN MY HOUSE WORK FOR ME. I AM A LOAN OFFICER AND I HELP PEOPLE LIKE YOU ALL THE TIME. 5 YEARS REALLY AIN'T TOO LONG TO PAY OFF A SMALL LOAN. THE TIME IT TAKES TO SAVE THE MONEY YOU WOULD BE ALMOST DONE PAYING FOR IT.
Dear Wife,
Can you save money and begin to update one thing at a time? It's nearly always better, in terms of stress and financial management, to avoid debt when possible. Here, it's not necessary to take a loan in order to buy a house or renovate to sell, so take your time!
-j.
#1 ask you accountant. you may be able to benefit from paying interest, ie tax breaks.
#2 With the decline in the market, your always better having cash in hand.
If there is an emergency you have the cash available.
I would say borrow and pay back gradually.
Completely depends on your financial situation and tax bracket. Sounds like you already have security, I'm willing to bet you don't have a ton of assets. Please don't take this as a personal assualt but being as responsible as you have been with money, I am sure you could have been ten times further (as far as net worth) if you would have used the money you've made in different ways.
Leveraging - it's how the banks make money. Borrow money at a low interest rate and lend it at a higher interest rate. For instance, that 7-8% that you'd be paying on a home equity loan...
If you where to take 100k from the equity in your home, borrowed at 8% interest only payments would come to 667.00/mo
Now put that 100k into an equity fund (such as the russel 3000) and get at least a 10% return on your money (russel 3000 average 14.9 over previous 10yrs) compounded annually and look what happens
1st year return = $10,000.00
2nd yr return = $21,000.00
3rd yr return = $33,100.00
4th yr return = $46,410.00
5th yr return = $61,051.00
6th yr return = $77,606.00
7th yr return = $95,366.00
8th yr return = $114,902.00
9th yr return = $136,392.00
10th yr return = $160,031.00
Total amount in fund at end of 10yrs = $260,031.00
Total spent on payments to home equity line = $80,040.00
Total profit = $79,991.00 / We'll call it 80k return for doing nothing, this is not taking into account your tax benefit either.
Make interest your friend, not your enemy.
Now as far as the home improvements... That's completely on you but I wouldn't finance home improvements, I would pay cash for anything that is not "necessary to sustain life". Financing unecessary things is why americans are in debt.
Speak to a qualified financial advisor.
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