How to finance expensive home repair?

[moneyguidance]

We have a home repair that it looks like insurance won’t cover (but still working on that angle). In the meantime it needs to get done and looks like it’ll be around $47,000. As my previous posts say we’re working on refinancing. The mortgage person said that since the process is pretty much in the works he recommends taking out a home equity loan (this was communicated to me from my husband).

So I googled and see there’s a home equity loan and a home equity line of credit (so not exactly sure which one the mortgage person recommended). Can anyone provide some guidance on what we should look in to? I assume these 2 options are the lowest interest rate options? We do have about $20,000 in cash we could use, but I don’t really want to wipe out most of our cash reserves.

Thank you!

[melmel48]

sadlebred you did a great job explaining the HELOC to me. Can you help?

[madisen]

Is the refinance you’re working on a cash out or rate/term? Are you expecting to pay off the heloc soon or keep the minimum payments?

[moneyguidance]

Sept 1, 2021 20:47:55 GMT -5 madisen said:

Is the refinance you’re working on a cash out or rate/term? Are you expecting to pay off the heloc soon or keep the minimum payments?

I have no idea what a cash out means?
Nor do I know anything about a HELOC? Is that a loan? If so, yes I’d want to pay off the loan as soon as possible.
Hence my questions

[hazelden]

There's a home loan program in my state that I've used before for a few different projects. We received a grant on our last project because we met the income guidelines. I love this program and recommend it to anyone that will listen. I know around here that sewer repair work can be very costly and financing can be worked out directly with the city and they'll add the amount of the repair to your taxes to be paid back over 10 years, or something like that.

Here's the program we used in MN www.mncee.org/home-improvement

[sadlebred]

A HELOC or Home Equity Line of Credit is sort of like a credit card. You have to have a mortgage on a home (often a single family home-detached) and equity in the home to have one. You'd open it often with the same company that you have your mortgage with, especially if it's a big bank/credit union that services their own loans. You are approved for $X amount of credit on the HELOC for a period of time, often 10 years. At any time during that 10 years you can use a portion of the credit (remember, it's really a loan) or all of the amount to do just about whatever you want. Or you never have to use any of it. Experts recommend not making purchases like a boat, car, "fun" things like vacations, or other non-house things with it. Common uses are home renovations, home maintenance like painting/new roof/removing trees, a new fence, etc.

I'm not sure if you'd have enough/any equity in your home to get one immediately after purchase unless you put a lot down or bought for tens of thousands under market price. You may need to look at other types of loans.

[moneyguidance]

Sept 1, 2021 22:31:06 GMT -5 sadlebred said:

A HELOC or Home Equity Line of Credit is sort of like a credit card. You have to have a mortgage on a home (often a single family home-detached) and equity in the home to have one. You'd open it often with the same company that you have your mortgage with, especially if it's a big bank/credit union that services their own loans. You are approved for $X amount of credit on the HELOC for a period of time, often 10 years. At any time during that 10 years you can use a portion of the credit (remember, it's really a loan) or all of the amount to do just about whatever you want. Or you never have to use any of it. Experts recommend not making purchases like a boat, car, "fun" things like vacations, or other non-house things with it. Common uses are home renovations, home maintenance like painting/new roof/removing trees, a new fence, etc.

I'm not sure if you'd have enough/any equity in your home to get one immediately after purchase unless you put a lot down or bought for tens of thousands under market price. You may need to look at other types of loans.

Great, thank you for the information.
So I guess these lines of credit typically aren’t given to people who live in cities since you mention they are for detached only homes? I guess I need to look in to that more since we do live in a row home.

[melmel48]

Sept 1, 2021 23:13:43 GMT -5 moneyguidance said:

Sept 1, 2021 22:31:06 GMT -5 sadlebred said:

A HELOC or Home Equity Line of Credit is sort of like a credit card. You have to have a mortgage on a home (often a single family home-detached) and equity in the home to have one. You'd open it often with the same company that you have your mortgage with, especially if it's a big bank/credit union that services their own loans. You are approved for $X amount of credit on the HELOC for a period of time, often 10 years. At any time during that 10 years you can use a portion of the credit (remember, it's really a loan) or all of the amount to do just about whatever you want. Or you never have to use any of it. Experts recommend not making purchases like a boat, car, "fun" things like vacations, or other non-house things with it. Common uses are home renovations, home maintenance like painting/new roof/removing trees, a new fence, etc.

I'm not sure if you'd have enough/any equity in your home to get one immediately after purchase unless you put a lot down or bought for tens of thousands under market price. You may need to look at other types of loans.

Great, thank you for the information.
So I guess these lines of credit typically aren’t given to people who live in cities since you mention they are for detached only homes? I guess I need to look in to that more since we do live in a row home.

I would still research it! She said often for detached, not only! In your research, you may find other options that work for you, or you may be able to do a HELOC on a row home. I am going to research what is available to me being a condo owner. 

[moneyguidance]

Sept 2, 2021 9:23:18 GMT -5 melmel48 said:

Sept 1, 2021 23:13:43 GMT -5 moneyguidance said:

Great, thank you for the information.
So I guess these lines of credit typically aren’t given to people who live in cities since you mention they are for detached only homes? I guess I need to look in to that more since we do live in a row home.

I would still research it! She said often for detached, not only! In your research, you may find other options that work for you, or you may be able to do a HELOC on a row home. I am going to research what is available to me being a condo owner. 

Do you know how they figure out your equity? Do they send someone to do an appraisal?

[ellipses84]

Is it the result of a Natural Disaster? You may be eligible for an SBA loan through FEMA. It’s for homeowners, not just small businesses.

[sadlebred]

Sept 2, 2021 10:00:09 GMT -5 moneyguidance said:

Sept 2, 2021 9:23:18 GMT -5 melmel48 said:

I would still research it! She said often for detached, not only! In your research, you may find other options that work for you, or you may be able to do a HELOC on a row home. I am going to research what is available to me being a condo owner. 

Do you know how they figure out your equity? Do they send someone to do an appraisal?

It would depend on the lender. I got one as part of a refinance, so they didn't do an appraisal. I've also been in my home for over a decade, and the value has gone up quite a bit in my part of my suburb. I don't know about row homes, townhouses, or condos. Sorry!

[madisen]

HELOCs are available on most 1 unit properties regardless of city or suburban location or single family home vs townhome or condo.

Banks and credit unions traditionally have an appetite for these loans so I suggest starting there. They usually max out at 80% combined loan to value (CLTV) though. Not sure how much equity you have in your home.

[moneyguidance]

Sept 11, 2021 1:32:22 GMT -5 madisen said:

HELOCs are available on most 1 unit properties regardless of city or suburban location or single family home vs townhome or condo.

Banks and credit unions traditionally have an appetite for these loans so I suggest starting there. They usually max out at 80% combined loan to value (CLTV) though. Not sure how much equity you have in your home.

Thank you for the info!
I wasn’t sure where to start. Will look in to it.