BlsdMama Posted July 6, 2015 Share Posted July 6, 2015 What do you know about home equity loans? We'd like to do a re-fi on our house, and a "cash out" VA is an option, but ideally, we'd like to do all the work first. We have our basement about 1/2 way finished and we have about $3-4k left to go and we'd do most of that in cash. (The egress wells were dug this last week - SO happy! The walls are up, closets and bedrooms built. Now to mud, tape, and texture!) We are putting hardwood in the front room - $2k. We are doing a major kitchen remodel (not including the cabinets, but the counters, floor, and appliances - probably $12k total.) And we have two major bathroom remodels - the main (already have the tub and surround tile, etc. bought and the new potty is in place. Still need to tile the floor and get a new vanity. The other bathroom will have a laundry and shower installed in the basement and need a vanity.) I'm guessing bathrooms will be about $3k. Then we need a new furnace. This one is 21 years old and I'm doubtful it will survive much longer. How much is that? I'm going to estimate $10k. So total we'd be looking at would be $30,000 for the home equity loan through our credit union. We have about $50k in equity in the house (before any remodeling or repairs - as is currently) and VA will go 100% but it would be easier (on us) to do the home equity loan, do all the remodeling, and then just do the re-fi and wrap the home equity loan into it. Has anyone does this? Did it go smoothly? Credit is good and we have a good relationship with our credit union. Rates are currently running between 3.25 - 5%. Quote Link to comment Share on other sites More sharing options...
arnold Posted July 6, 2015 Share Posted July 6, 2015 I would not take an equity loan out against my house to make non essential home impovements. 2 Quote Link to comment Share on other sites More sharing options...
speedmom4 Posted July 6, 2015 Share Posted July 6, 2015 I would not take an equity loan out against my house to make non essential home impovements. Agree! Elise in NC Quote Link to comment Share on other sites More sharing options...
Greta Posted July 6, 2015 Share Posted July 6, 2015 I wouldn't either. I know it's a very common, normal thing to do, but it makes me nervous. We've worked hard and sacrificed to build the equity we have in our home. I'm not willing to give it up!!! :) Quote Link to comment Share on other sites More sharing options...
Guest Posted July 6, 2015 Share Posted July 6, 2015 I wouldn't either. I know it's a very common, normal thing to do, but it makes me nervous. We've worked hard and sacrificed to build the equity we have in our home. I'm not willing to give it up!!! :) I don't think it is as common as it used to be. Lots of people got bit on the behind when home values crashed. Op, I wouldn't do it but one of my main goals is to be totally out of debt. Ymmv. 1 Quote Link to comment Share on other sites More sharing options...
LisaKinVA Posted July 6, 2015 Share Posted July 6, 2015 Here is what I know...it depends upon the loans, and the housing market. Two loans can often mean twice the closing costs. A lot can happen between closing on one loan and getting a second loan. Interest rates can go up, loan products can change or disappear, the comps you get the second time can be lower than the comps used the first time...essentially you can't bank on things going smoothly in the future. As for equity lines of credit, really read the fine print. Some have payoff penalties, or balloon payments. It's easy to think that you'll be able to refinance later, but I have seen enough in the housing industry to be very cautious about counting on something being available later. Adding finished square footage is almost always a good investment. Replacing things you'd have to replace anyway, and kitchens and baths are all relatively safe investments in your home (assuming you don't overdo for the area). It also doesn't sound like you are trying to move, and plan to stay. But, if it were me, I'd probably do the re-fi and call it done. I've had too many things go wrong with mortgage plans, some of which really cost us. Some things I'm wondering...is the loan based upon it's current value, or post fixed up value? A finished basement can be about $50 sq. Ft. of extra value to the home (where we are from). A full bath is worth about $10,000. If you move forward with a refi, I would ask, if after you complete the work, they will reevaluate the comps to eliminate mortgage insurance. Also, have you sat down with a mortgage specialist at your credit union to go over these options? 1 Quote Link to comment Share on other sites More sharing options...
Arcadia Posted July 6, 2015 Share Posted July 6, 2015 We managed to roll most of our HELOC into our main loan when we refinance many years ago but we didn't take money out. We paid 5% down when buying this home so 15% was HELOC. When we refinance, most of what was left of HELOC was roll into the main loan because the appraised value went up by $30k since we bought. We cleared the small HELOC loan fast as that interest rate is higher than the main loan. You would have to punch in the numbers with a few mortgage specialist and see whether it is feasible assuming pay is stagnant. ETA: For my floor plan, the lowest sold price during economic downturn was $270k in around 2009. The highest sold price recently was $570k for same floor plan. Price fluctuations are crazy. ETA: For us the interest rate for HELOC both times was higher than about 1.5% compared to the main loan. It would make more sense in our case to have a higher main loan and smaller or no HELOC. Quote Link to comment Share on other sites More sharing options...
NicksMama-Zack's Mama Too Posted July 6, 2015 Share Posted July 6, 2015 We re-fied at a much lower rate than original mortgage. We took some equity out and finished our basement,invested some and funded some 529s. Our house payment remained the same and our house increased in value, so we felt it was worth the extra time/interest on our mortgage. We like having liquid assets and we are not in any hurry to pay it off though so ymmv. Quote Link to comment Share on other sites More sharing options...
frogger Posted July 6, 2015 Share Posted July 6, 2015 We are having a similar issues. We would gladly wait and save but our utilities keep going up and up and by weatherizing some we plan on bringing our costs down by hundreds. I would be wary about paying for closing costs twice though. Also, you have no idea what interests rates will be in the future. Historically speaking this is an extraordinary time for low interest rates. You also don't know what the appraiser will value your home at. I have seen people work on their home and get it appraised at less then before they worked on it and what they did made a big difference. I just got an appraisal that valued my home for 350,000 despite getting the tax assessor out here to bring down my value multiple times. The muni still wants it appraised at 400,000. Also, the original appraiser from when we bought it valued it only 10 grand less then this guy despite that being many years ago in a rapidly rising market but the bank will take the appraisers word of course. So there are a lot of unknowns. I probably wouldn't do things for purely cosmetic reasons but there are times when things need done to prevent further damage say or lower utility costs or safety hazards. You just have to weigh the risks with the costs and benefits. Quote Link to comment Share on other sites More sharing options...
Jaz Posted July 6, 2015 Share Posted July 6, 2015 Our a/c died last year then our sewer line needed to be replaced this spring. We just took out a HELOC to pay for them because we had to put those big ticket items on credit cards. We're very happy with our HELOC. We've gained over $80,000 of equity in our home in the five years we've lived here as we bought at the low. We refinanced a couple of years ago to a 15 year mortgage so we were in the reverse situation of what you're considering. If you can refi now and take the money out, I'd probably do it that way so you can lock in a low interest rate. Quote Link to comment Share on other sites More sharing options...
TranquilMind Posted July 6, 2015 Share Posted July 6, 2015 What do you know about home equity loans? We'd like to do a re-fi on our house, and a "cash out" VA is an option, but ideally, we'd like to do all the work first. We have our basement about 1/2 way finished and we have about $3-4k left to go and we'd do most of that in cash. (The egress wells were dug this last week - SO happy! The walls are up, closets and bedrooms built. Now to mud, tape, and texture!) We are putting hardwood in the front room - $2k. We are doing a major kitchen remodel (not including the cabinets, but the counters, floor, and appliances - probably $12k total.) And we have two major bathroom remodels - the main (already have the tub and surround tile, etc. bought and the new potty is in place. Still need to tile the floor and get a new vanity. The other bathroom will have a laundry and shower installed in the basement and need a vanity.) I'm guessing bathrooms will be about $3k. Then we need a new furnace. This one is 21 years old and I'm doubtful it will survive much longer. How much is that? I'm going to estimate $10k. So total we'd be looking at would be $30,000 for the home equity loan through our credit union. We have about $50k in equity in the house (before any remodeling or repairs - as is currently) and VA will go 100% but it would be easier (on us) to do the home equity loan, do all the remodeling, and then just do the re-fi and wrap the home equity loan into it. Has anyone does this? Did it go smoothly? Credit is good and we have a good relationship with our credit union. Rates are currently running between 3.25 - 5%. I wouldn't even dream of taking $30,000 if you only have $50,000 in equity for nonessential updating but it sounds as if you are already in the midst of it. Rates rose just last week and equity lines are adjustable by definition. I think out of debt is the way to go right now. But just my two cents. If you are selling, you are cutting it very close. Buyers are ridiculous and practically demand new wings to be built onto the house (I've sold two recently). Quote Link to comment Share on other sites More sharing options...
Recommended Posts
Join the conversation
You can post now and register later. If you have an account, sign in now to post with your account.