I'm thinking of getting a home equity loan to remodel. Is this a good idea?

Question

I'll never save enough to put out that much up front. I don't have enough cash to put out.

Answer 1

It depends on how much you need to remodel. You'd be surprised how much cash you can save up if you make a written plan and set aside few hundred a month. Remember, you're going to have to set aside a few hundred a month to repay the equity loan anyway.

I've remolded my home slowly and in phases. I usually save a certain amount per month then when I get my tax refund at the end of the year I combine that and pay cash. In 2004 I did the kitchen and bathroom countertops, in 2005 I did laminate flooring and tile, in 2006 I did new appliances. I usually end up doing about 5K a year in improvements. In 5 years I have $25,000 in improvements and not owe a penny. Using a home equity loan I would still have another 5 to 15 years left of paying.

Sure some would argue that you get an extra tax deduction, but why would I want to borrow $25K and pay $40K after intrest to save $5K on my taxes???

Answer 2

appraisals are usually about 300. Why on earth would you pay 11% that is waayyyyyy too high. Current rates are around 6.75% for a 30 year fixed loan. I would recommend a refi to take the cash out for the remodel because you will definitly get a better rate with a first mortgage then a home equity loan. If I was you I would call a mortgage broker and shop around before you do anything else.

Answer 3

STOP!!!
I almost lost my arssssenic doing this! Thankfully my finances are OK now...
Get to the bank BEFORE you start to see how much backing you'll get. Don't assume because you've owned a house "x" number of years that there is enough equity in it. Man, I created a nightmare for myself starting into a major renovation before checking out the finances first.
Yes, it is possible to do a home equity loan on the house to get money for a renovation, and it is even a good idea in some cases. But......make sure you check everything out with the bank and get the go-ahead before you start the project or you'll be scrambling to find creative ways to pay the contractors.

Answer 4

This is done all the time so it is a good idea on a short term basis. However, home equity loans typically carry interest rates about two point higher than mortgages. So, I'd look at refinancing when the job is done if you plan to carry the remodel loan for a long period of time.

Answer 5

I wouldn't refinance, or get a home equity loan. Unless your in serious need for this remodel (like your roof is caving in, or your floors are rotten) then I would suggest you save for it, or do little by little. This way your are not putting your house in danger and your not getting into debt.

Answer 6

I would recommend smaller projects that you can pay for in cash. If you can't save money before hand, what makes you think you will save the money for loan payments? That said, home improvements are the ONLY thing I would for which I would consider borrowing against my home.

Answer 7

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Answer 8

its not because its like starting at the beginning again, you have to repay, look for community improvemnt grants, its federal grants and you dont have to pay it back and best yet it helps improve home equity, should you turn around and sell you house you get more money and it helps other people in their home equity, its like having a HUD home

Answer 9

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