Author Topic: Home Improvements and a Refinance  (Read 1257 times)

bigwhitedawg

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Home Improvements and a Refinance
« on: November 07, 2016, 09:32:00 AM »
My wife and I own an older home that is in need of some fairly extensive work, primarily siding/painting, and new windows.  We're getting bids on this work now, but I'm anticipating 25-30k worth of expense.

Home value: ~$430k with no improvements
outstanding mortgage: ~$148k
Current mortgage is 30yr fixed at 4.8%

We typically pay extra on the loan (and have for some time,) and would continue to do so.  We've also been looking at re-financing to a 15yr fixed where we can get an APR of 2.61% with a local credit union. 

We have the cash set aside to make the improvements, but the question becomes, at that low rate of interest, would it make more sense to re-fi with cash back to cover the improvements and move our fix-it cash to other investments?

Drifterrider

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Re: Home Improvements and a Refinance
« Reply #1 on: November 08, 2016, 07:23:26 AM »
If you refinance you have closing cost.

Based on your stated value and LTV, have you looked into a short term low interest home improvement loan?

Most places will loan you more than 25K on a new car at 1-2%, perhaps they will offer good terms for home improvement.

GrOW

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Re: Home Improvements and a Refinance
« Reply #2 on: November 08, 2016, 07:51:27 AM »
I agree with Driftrrider on the idea of comparing 'non-traditional' options. The lowest cost option may not be the most obvious option. Car refi, credit card with low to zero % intro rate, 2nd mortgage, reduce emergency fund, etc.

Three question - how many years remain on your current 30 year mortgage? How long do you plan to keep this home? How long do you expect to take to pay off this new debt?

I would strongly recommend starting an excel doc to compare options. With some time and a few basic formulas, you can build a sheet that compares options. If you like visuals, you can build a line chart to show options over time.

Another Reader

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Re: Home Improvements and a Refinance
« Reply #3 on: November 08, 2016, 08:46:30 AM »
In your shoes, I would focus on getting rid of that 4.8 percent mortgage.  You should be able to get a 30 year in the low three's and your 15 year at 2.61 APR (assuming that means all in) is a good deal.  I would roll in the anticipated costs, less what you can cash flow.

psyclotr0n

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Re: Home Improvements and a Refinance
« Reply #4 on: November 08, 2016, 10:38:45 AM »
Wow., 2.61 is a great deal. My local CU is 2.9 up to $417k.

Anyone try getting quotes from the Bankrate comparison? It seems like you basically have to apply for a loan to find out your rate, so not sure that I trust the comparison...

bigwhitedawg

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Re: Home Improvements and a Refinance
« Reply #5 on: November 08, 2016, 12:55:15 PM »
We're 5.5 years into our original 30 year mortgage, and even if we move, we would likely keep the property as a rental as it is in a very desirable area, the one downside is high property taxes ($7300/yr.)

I hadn't thought of other loan vehicles, I'll look into other possibilities as well.  One car is paid for, the other has 1 year on a 0% loan left to pay off.  There isn't any other debt.  It's really a question of using cash available that would otherwise go into investments or leverage the equity at a very low rate to absorb the expense.  Looking at the numbers, we'll refinance regardless, now it's just a question of the current loan payoff or adding in the repair expense. 

The rate is 2.61 APR (all in) that was a surprising number, so we're moving on that pretty quickly.