Renovation--HEL or cash?

[tealblue]

Open a HELOC. Ours was free as long as we took $10k in cash at closing. We were able to turn around a few days later and pay off the balance. Our heloc is at prime, so it's 3.25%. In your situation, I would open one (it sounds like you have a bit of equity in the house currently?). Use it to pay the renovations and cash flow the payments. Whatever cash you have on hand- you can throw that towards the HELOC. At the end of your reno, then you can decide if you want to cash out any investments- gives you some flexibility on what to do.

[tealblue]

Oct 23, 2014 14:05:55 GMT -5 @mx said:

Oct 23, 2014 13:37:46 GMT -5 tealblue said:

Open a HELOC. Ours was free as long as we took $10k in cash at closing. We were able to turn around a few days later and pay off the balance. Our heloc is at prime, so it's 3.25%. In your situation, I would open one (it sounds like you have a bit of equity in the house currently?). Use it to pay the renovations and cash flow the payments. Whatever cash you have on hand- you can throw that towards the HELOC. At the end of your reno, then you can decide if you want to cash out any investments- gives you some flexibility on what to do.

With a HELOC the rate is variable right? That might work since most of the expense will be within a 6 month period and I don't see rates shooting up too much in that time.

We have ~$280,000 in equity (pending appraisal) so I think we shouldn't have an issue getting approved for what we'd want to spend. All of the zeroes are just overwhelming at this stage I guess. Once we have the work done I'm sure I'll be glad we did it (assuming H and I haven't killed each other or divorced in the process!).

Yeah the rate with a HELOC is variable. We've had ours open 2 years and there's never been a rate change, I think the prime rate has stayed the same for quite a long time.

Renovations are stressful when everything goes well, so I wish you luck as you start! I secretly hope we bust open a wall or ceiling and find a stash of cash behind something, but so far we have only found hidden problems to fix!

[lys]

HELOC and HEL are two different things.
A HELOC acts like a credit card with interest paid on the balance with an allowable limit which you can borrow and put on the card.

A HEL - acts like a regular loan with a specific amount loaned, fixed monthly payments and a specific time period for payment

You need to still have equity in your home AFTER the HELOC or HEL. How much will depend on your lender.

I prefer paying cash or very small amounts of a HEL - paid off ASAP.

[Susie]

I'm pretty immune to $000,000's shock. Graduating from law school a few hundred $k in the hole, with no assets to speak of, will do that. So to me, not having that hangup, the choice to do the HEL is an easy one. You get much more flexibility, the ability to deduct the interest, and you can pay it off later if you really want to.