My wife and I moved into a fixer upper 4 years ago and have been financing or renovation through cash flow. We have two projects left, replace the falling down garage and update the upstairs bathroom.
Our last refinance in the middle of it kitchen renovation valued the house for 45k more than the 200k we paid and it should be work 300-320k when we are done. We owe 154k on a 20yr loan.
We can currently save 18k per yr after tax and maxing our 401Ks, IRAs, and HSA. We would really like to finish the garage before winter because the neighbor who was letting us park in their extra space has moved and we have a 5 min walk to find street parking.
The new garage will cost 23k. We have 31k in cash/after tax investment savings at a combined ~4.5% interest. 22k is considered an emergency fund and we are very resistant to tapping it. I have a very secure job and 100k in a 401k which I can borrow from and pay 2.1% interest back to myself; I would borrow the entire 23k from a bond fund allocation paying 2.3% so I won't lose out on gains. Last, we could get a HELOC. Rates seem to be about 4-5% but this is deductible at a 20.5% tax rate (fed/state).
How should I go about financing the new garage?
