HELOC/home equity loans/etc

[beerlover]

It seems like many on this board have tons of savings and are able to just straight-up pay for repairs & renovations, but we unfortunately do not have this kind of money without wiping out our modest savings. Perks of working in education, lol. Please tell me what you have done to pay for expensive home repairs if you do not have thousands and thousands of dollars in savings. I'm looking at possibly replacing our boiler at some point (probably 10K), and we have some other things that need done also. We bought our house 10 years ago and it was not clear how old the roof was, so I'm sure that will come up at some point too. Can someone explain my options to me like I'm 5 for getting some extra money for some of these projects? I keep getting texts from my lender about cash out refinances as well but that would be bad because of current interest rates, right? 

Please don't judge my stupidity in this area

[momin2013]

We also don’t really have savings - we have a HELOC and for major repairs (or anything really) we charge it to the HELOC and are just constantly paying it down. We have an all-in-one account that is our main chequing account/a HELOC that our paycheques go into and all expenses come out of, so it’s just constantly revolving.

[trissie18]

We are in the process of applying for a HELOC because we want the long-term flexibility to borrow as we need it this way we are only paying interest on the borrowed part, and not the full amount. It is also an adjustable rate so while it sucks now, the expectation is that rates should go down, so we will benefit from the lower rates.

[bex1973]

We went with a home equity loan versus line of credit because it was a fixed interest rate and fixed payment amount and that was more attractive to us. We did need to know how much we wanted but we had 2 specific projects planned so we just got our estimates and went from there.

[quesyrah]

We just save, save, save. We are a one income family and can’t afford to be in debt (other than our mortgage). So we have to just cash flow things and really make good decisions about needs vs wants.

We also just know that nothing we do to our house is ever going to be top of the line or fancy. And most of it is going to be DIY.


If we absolutely had to we would finance home repairs but I would only go that route if it was an absolutely necessary repair and we had no other choice.

My house is 80 years old and has original single pane metal casing windows that should really be replaced, and a 20 year old roof. We are currently saving for both of those in the hope that once it HAS to be done we’ll have the money.

[wanderingback]

Jan 3, 2024 16:50:38 GMT -5 bex1973 said:

We went with a home equity loan versus line of credit because it was a fixed interest rate and fixed payment amount and that was more attractive to us. We did need to know how much we wanted but we had 2 specific projects planned so we just got our estimates and went from there.

This. Contractors next door caused damage to our house. To make a long story short after research I also decided to go with home equity loan for those exact reasons. We have a fixed interest rate and are just paying it back. We took out a longer term cause with daycare and student loan payments starting up we didn’t want to stretch ourselves too thin, but we plan to pay it back early.

I personally didn’t like the temptation of a HELOC and that the interest rate could change.

[tealblue]

When we bought our fixer upper, we didn’t have any money saved. We opened a HELOC, which is basically an open line of credit against the equity in your house. The interest rate was variable (prime) which was fine at the time because prime was super low. Now it’s 6 or 7% so that makes it more expensive. We could make payments monthly or also throw chunks of money at it. Our monthly payment was 2% of the prior month average balance.

We used it for house repairs but then refinanced our mortgage when rates were below 3% and they had to close the HELOC.

For your projects, I would look into a HEL which is a fixed % and a fixed term, so your payment would be fixed. You could get a quote for the boiler and then get a HEL for that amount. You’ll know the monthly payments and how long you’ll have to pay. If you get a roof, you could do the same.

[7costanza]

We did a cash out refinance when rates were much lower, hopefully they will drop again in the not too distant future. We had a bunch of projects we wanted to do so got estimates then added a cushion (we took out $50k cash). Our payments went up a few hundred but I like that they’re fixed (other than taxes and insurance.) anything in the future we plan to save for or sell ESPP stocks to fund.

[puppyluv]

Some contractors offer short terms loans to make it work. I think one of our roofing quotes offered a 2-3 year loan. For our new water heater, we were offered a 6 month installment plan to pay.

[katb]

We have done two refinances - the last one in 2020 when rates were insanely low. The other option we have done is company financing - it was a very low interest rate to go on payment plan and they let us pay over a year. We had a leak and our subfloor/tub/drywall was all ruined by the time we noticed it (leaking into a crawl space). Insurance didn't cover it all so we made payments through them. Even with interest rates so high, you have to do what you have to do. If it's less than $20k, I would look into a HELOC just because I feel the refinancing fees and higher interest may not be worth it - but that is also something you have to gauge. Def run some calculators with numbers.

[sproctopus]

We had to replace our furnace ($20k) the same week we wrote a check for the last part of our kitchen remodel.

The furnace we financed through our utility company-- it was a 0.99% interest rate for 7 years. We used a cash-out refi for our kitchen.

[wanderingback]

I realize I may not have answered your question exactly in regards to explaining the process.

We decided to go with a credit union cause it seemed the easiest. I called them to talk about the difference between a HELOC and home equity loan, they weren’t particularly helpful Lol, pretty much just recited what was in their website. So I did research and me and my partner decided on home equity.

Since it was through a credit union I then had to apply to be a member. So I did that. After that they have to appraise the house to make sure you have enough equity. I learned that the house has to be in liveable condition which means it has to have a working kitchen and 1 working bathroom. Ours took a little longer cause we were in the middle of a construction project on the outside and it looked a mess but it was technically liveable.

After the appraisal they told us how much we could take out and based on our equity they did ask for a copy of the contract from the contractors about how much the project was. Then the whole credit check process. After that the loan person told me the different lengths of loan options and interest rates. We picked one. Then went to sign the paperwork and then a few days later all the money was in the credit union checking account ($35,000). Then a month later repayment terms started.

I think the whole process took maybe a month? I can’t remember exactly! Hope that helps.

[plutosmoon]

For the boiler, I'd check to see if your state or utility company offer any loans. My state has heat loans at 0% interest for energy efficient systems, bigger loans for heat pumps.

If you have a good interest rate on your current mortgage, I'd avoid a cash out refi, at least until rates come down. HELOCs are nice because of their flexibility. When I had my HELOC it came with checks, so basically, you could write the checks as needed up to whatever the maximum limit was.

[beerlover]

plutosmoon, I don't see anything about loans but it appears I can at least get a $1200 rebate for installing an energy efficient boiler. It's something!

My mortgage interest rate is 3.375%. So. Prob never getting close to that again lol.

Thanks for the link to the other thread dochas and all the super helpful info you put in there!

[heygrey]

Are these things you want to do urgently or just in the future? I'd start saving a few hundred a month now because you'll have to find that in your budget to pay back a loan anyway. You get the benefit of interest earned now and less to pay back later! Even if the projects become urgent you won't have to take out a loan for the whole amount.

[beerlover]

heygrey, it's hard to tell. Our boiler is from the 1970s and this is the first year we've had several issues with it. It really SHOULD be replaced with something more energy efficient, but could it last a few more years? Maybe. Or will it shit the bed completely in the middle of winter? Also maybe. lol. It's making me anxious.

I'll up my savings a little in the meantime while I continue to think on this and review options but I'm basically just worst case scenario planning, if we have to do something ASAP and can't cover it from our savings.

[sadlebred]

I know some of the larger roofing companies in my area are offering 4-5% interest 12-36 month loans for new roofs. It might be something to consider since rates are still high.

[khibb]

We did a HELOC and a home equity loan when we redid our downstairs last year (our bank did 80% of our loan as a home equity loan and the other 20% as a HELOC- it was a requirement as part of the loan). Honestly I would never get a HELOC again if I could avoid it. Our interest rate started at 5% and has climbed up to 9.5% over the course of the year. We are lucky that the HELOC is a relatively small amount and we can pay it off pretty quickly if we continue to dump all of our extra cash into it like we have been. If our entire loan had been a HELOC we would have been in a lot of trouble. A HELOC is just too unpredictable and isn’t something I would recommend to anyone.

[mrsukyankee]

If you are going to have a repayment plan later on, figure out how much that will cost you monthly and start putting it into your budget now (put it in savings). You'll get used to not having that amount in your account AND have some money saved which you can apply to future reno/house costs.

[simpsongal]

We've used a combination of savings, HELOC, 401K loan, and 0% credit card for our current renovation.

I think Wells Fargo is doing a 0% CC for like 15-24 months? If you have good credit and a $20K expense in mind, you could use the card for it, pay it down over the year? If you can't pay it off during the promo period, at that point you could utilize a HELOC. Our HELOC hasn't gone above 7%, it's nice to have the flexibility for major expenses.

The benefit of the HELOC or HEL is you can deduct the interest - but that's only if you itemize your taxes. And with the changes from the TCJA, fewer people are itemizing b/c the standard deduction is so high (plus the SALT cap severely limits deductions for folks on the coasts)).