Would you do this addition v. 2.0

[hamster]

Refresher on our home: 3 bed, 1 bath, 1376 sq. ft on 1.75 acres. Bought for 260k, owe 185k. 12 years remaining on a 15 year mortgage. Interest rate is something like 3.5%.

We have significantly reduced the scope of our proposed home project. The new plan is to add on 576 sq. ft as a master suite, laundry room and bonus room. This is estimated at 90k, though our contractor did say he hopes to beat that. In addition we would be significantly expanding our concrete patio and adding a good cover (it's Oregon after all), which would be 20k, though we can reduce the aesthetic of the patio for lower cost. Unrelated, we need a new well drilled which is an estimated 7-10k. All in, we are talking 120k for this project. Improving the existing interior would then become a down the road project.

I did not get the report from the bank, but we are approved for the full 90k we requested, which means they estimate our current, as-is house at 350k. A realtor, without actually seeing it, estimated 320-340.
For comparison, we saw a house a couple weeks ago that was similar in size to our proposed new house, of similar age and datedness of our current house. It has one additional acre, though the land is less useable, in a less desirable area of town, and in a much worse neighborhood. There is also zero fencing or outbuildings (important to us rural folk). They are asking 425k, which does not feel unreasonable, though it is not yet pending.

Interest rate on the Heloc is a floating 5.25%. We can lock, but it's in the 6.5% range I believe. I do not have additional answers to questions regarding the loan quite yet. We were concerned we could not get enough equity if we did a straight refi. I still think that's likely true given the realtors assessment.

So, MM, what's the verdict? My gut says this is a sound financial decision.

Also, children are expensive. We didnt have this problem as DINKs!!

[tealblue]

I think it’s a good plan. We have a similar sized lot (and approx 2,000-2100 sq ft) and I love it. We also dropped $$$ into a renovation last year and are looking at a similar $ patio renovation in the next year or two.

My only worry for you is the heloc. We also financed half on our heloc, so I’m not opposed to that at all. I worry about your payment on it though. Ours is 2% of the average outstanding balance. So if you come in at $80-90k, your payment on that would be $1600 a month extra. Just something to think about vs doing a HEL at a flat rate for x years. I do like that I can pay down large chunks of it though with bonuses or tax refunds and see an immediate change.

Also, your property taxes will increase, so account for that as well. When we pulled permits, we had to give an estimate of the project cost and what do you know, our assessment went up the exact same amount!

[hamster]

Omg to that payment. If we do a lock it would be 871 a month IIRC, for 15 years. H gets a raise in April and we pay off his truck next month which will cover that. The only way to keep our payment close to what it is now is to do a fannie mae renovation loan which is about 6k in fees, 5.25% on a 30 year mortgage.

We definitely assume our taxes will double, but at least we are on the county rate!

[aprilsails]

How difficult will it be to live in the house while this is underway? Has the contractor given you a timeline? I ask because when we did our first floor renovation (complete gut and remodel) we spent a lot of extra money on takeout and had to stay away from the house some evenings because the contractors were working and needed the run of the house (well really it was just unpleasant to be there while they were sanding drywall, etc). These are all temporary costs but they did add up quite a bit for us.

Otherwise I think this plan works.

[hamster]

aprilsails since we are no longer doing renovations to the interior it should be minimal disruption, all things considered.

The washer and dryer will be moved and that space would become a closet, the water heater will be moved (already in a closet) and the window above the kitchen sink will go away. The addition is going along the east side of our house and will be connected via a hallway in our dining room.

Only timeline we have is how long to start once I give them the green light. It would be during summer which is a partial bummer, but if we seek solitude at MILs she will do a lot of childcare help so, pros and cons!

[madringal]

I think it sounds good. Have you compared the HELOC to a cash out refinance of your existing mortgage?

[dr.girlfriend]

Well, you know I'm doing a similar thing for $180k, so I vote yes. :-) Are you in this area long-term, with job stability?

Not sure about the HELOC vs. Home Equity Loan. When I was looking, our credit union was offering 2 - 3% range for home equity loans, with no origination fees or prepayment penalties.

[hamster]

Feb 21, 2019 13:24:46 GMT -5 madringal said:

I think it sounds good. Have you compared the HELOC to a cash out refinance of your existing mortgage?

Sort of. The bank is running a 20 year mortgage for 4.5%. The monthly payment would be less, but almost 4k in fees (compared to $175 + $45 annually). It would also add 8 years to our mortgage which...eh. I have not looked to see how it compares over the life of the loan.

That's assuming it appraised out. The heloc was basically them looking at their banking version of zillow and doing a drive by. It's a very generous appraisal.

[hamster]

Heloc payment is 1% of balance.

[hamster]

Oh God. We're gonna do it.

(My pinterest account has been waiting its WHOLE LIFE for this!)

[dr.girlfriend]

Feb 22, 2019 9:19:22 GMT -5 hamster said:

Oh God. We're gonna do it.

(My pinterest account has been waiting its WHOLE LIFE for this!)

Get thee to H&G so you can share your ideas!  Here's my board:

[hamster]

Feb 23, 2019 10:45:05 GMT -5 dr.girlfriend said:

Feb 22, 2019 9:19:22 GMT -5 hamster said:

Oh God. We're gonna do it.

(My pinterest account has been waiting its WHOLE LIFE for this!)

Get thee to H&G so you can share your ideas!  Here's my board:

Done!. I have a fee starter questions, and I'll tinker with my pinterest so it's all in one cohesive "addition" spot.