Remodeling: Cash or Credit?

[Leta]

The gut instinct is cash, right? But I lived in a house that was in a perpetual state of construction for most of my childhood, and it is very stressful and sapping.

So... please help me make this decison. Do we borrow money and go whole hog, or do we just do a little at a time?

[msjd123]

When we remodeled our bathrooms, we paid half in cash and used our HELOC for the other other half. Like you, I grew up with construction and I didn't want it to drag on forever. Plus, I was 8 months pregnant at the time and had an urgent need for that project to get DONE. I felt good our 50/50 arrangement because it allowed us to keep some money saved just in case something happened with me or the baby that would require me to take a longer maternity leave. It worked out quite well for us.

[tiffany21074]

i think it depends on what needs done. Is your heating system busted, your roof leaking, water leaks everywhere, are there literally hazards that must be taken care of right now? If so, then borrow it if it is costing you money in the long run to not take care of it. However, if it isn't that severe, how about listing all the repairs that need to be done and knocking them out one by one with cash. If you finance it all, you will trade your 'house' stress for 'money stress'. i personally would prefer house stress, and just find cheap ways to fix things and make them our own. and stuff that had to be bought brand new, shop around, talk to people, builders, etc, contractors to get the best price. won't you feel so much better when your house looks nice and you don't have an extra monthly payment?

[Leta]

Our house is not in BAD shape, it is just old. Our number one priority is to make it more energy efficient. So in that sense, it is costing us money not to remodel. Our bathroom had a band aid fix about a year ago, and this will last (maybe?) one more year before it will really need to be addressed.

We want to add another room to our house that will include a second bathroom, and we'd like to do this before we remodel the current bathroom, so that we are not bathroomless. This addition would be the single biggest expense (~$12,000), and also the thing that needs to be done first. So I dunno. I'm still pondering.

And yes, our estimate came from a highly reputiable contractor. (My dad.)

[Eman'smom]

We've lived in our house nearly 3 years, and we've been doing the whole, save fix something small, save again thing and it sucks.

We are going to spend the next 2 years saving/paying down debt and then get serious and take out a big loan and do it all at once. If we wait two years there won't be the money stress, and the house will be everything we want.

[Sharlla]

We are doing a little at a time. We don't have a mortgage and plan to keep it that way.

[lmonter]

We're saving up the cash for home remodels.

Our house is old-ish (it's a few years older than me), and needs a lot of updating. However, the only pressing thing we had (that dh did for a total of $100) was redo some stuff in the master bathroom. The floor was rotting through because the previous owners never changed the wax seal on the toilet. Luckily it didn't hit the subfloor, but still.

Everything else we want to do is mostly for our own pleasure... like redo the entire kitchen because half the cupboards are made out of particle board : and it's not laid out for anything resembling a cook; put in wood or hard floors because I'm somewhat allergic to our shag; a small deck out back because the stairs are horrible; dh put new shelving in the pantry so it's easier to use (and prettier!); adding a bunch more raised beds to the garden area, that kind of thing. The only super-pressing needs we've encountered though were the water heater dying and the garage door busting (both of which we put on credit cards with 0-3.99% - now we do better).

But, we bought this house with the idea that we'd grow into it and wouldn't *have* to move or add on in the future (because we're lazy that way I suppose). So while I wouldn't mind kicking out the dining room/kitchen wall out a few feet to make things easier to move around, we're not going to.

So just figure out what kind of payment (cash or loan) you'd feel most comfortable with. We're still struggling with the student loan monster after finally paying off all the credit cards, and are adamant about not doing a HELOC (the first mortgage is plenty for us), so owing more money to someone else isn't an option for dh and I. And can you add up how much your energy-draining house is actually costing you? If I can put actual numbers in front of dh and I it makes things easier to decide.
For example, we don't heat with electricity or gas because of this. If we heated with our sucky electric baseboard heaters, we'd be paying $200-$300/mo to keep the house liveable. Since we heat with wood, we pay $70-$100/mo (plus we put aside $20/mo for wood cutting supplies) and the house is nice and toasty (74-86 degrees F). Because of those numbers and the fact we could deduct the cost of the wood stove from our taxes (I love where we live!), it was a no-brainer for us. Although I'm still not pleased with the fact that the stoves went on a cc as well... *sigh*

[Luckiestgirl]

We've been in our current home for 3 years and have done one renovation at a time and paid cash. Yes, it's tough, but I found that taking a few months off between projects made it doable. Although I cringe thinking about the gutted bathroom with a two-month-old . . . and the six days at the Super 8 when the hardwoods were sanded . . .

But we've outgrown our home sooner than we thought, and now that we're considering moving on, so I'm glad we paid cash. I think paying cash also curbs the temptation to sink more into a house than one should.

Edited to say that personally, I'm not comfortable with home equity loans at all . . .

[MissMaryMack]

Cash, unless it's an emergency. If you use your credit for luxuries, then when your furnace dies/you lose a job/there's a medical emergency, you may not have credit enough left to handle it.

[EFmom]

I have always been of the cash-only school of thought until recently. Our house needed both a new roof and a bathroom rennovation at once. The roof couldn't wait, and the bathtub cracked to make it unusable.

We didn't have cash for both, so we took out a small (12K) home equity loan. We got enough for the roof to be redone and enough to buy the materials for dh to redo the bathroom right down to the studs. I'm regretting now that we didn't just get somebody in to remodel the bath instead of dh doing it. It would have cost more than twice as much. But, it's been six months now, and it's nowhere near done. Fortunately we have another bath and a half, but I am sooooo sick of having the house torn up. On the bright side, we are going to have the home equity loan paid off by the time dh gets the bath done.

[phathui5]

Our number one priority is to make it more energy efficient. So in that sense, it is costing us money not to remodel.

What things do you want to do to make it more energy efficient? The things that come to mind for me (swapping out lightbulbs, replacing appliances with Energy Star ones if they die, adding insulation to an attic) are all things that are Do-It-Yourself projects that you wouldn't finance.

[Leta]

We (not just want, but need to) replace all the windows and doors, insulate, either by gutting or getting some type of spray in insulation, insulate the attic (which we can pay cash for), tear out and redo the basement floor and in doing that, update/replace the existing, inefficient plumbing/heating system.

We also are going to get a new fridge, but that's a minor detail. We already have CFLs in everything.

Our heat bill is $400 per month in the winter, and our electric is about $80. We pay for water and have steam heat, so a new furnace would cut our water bill also.

[MissMaryMack]

I guess I should have said "cash, except in the case of NEED NOW" which I consider emergency. If our roof needed replacing or bathtub leaked, those are things that if you don't fix it NOW, you'll pay way more later, when water damage sets in.

[cristeen]

Your list of jobs sounds a lot like mine...

We did the windows a few years ago (half cash, I believe). As far as helping with heating, it definitely did! But, we didn't do another major job for 2 (3?) years. Then we had to do the roof. That was all credit (HELOC), and we're still paying on it 18 months later.

We would love to insulate, but it would require gutting the entire house (we've been informed that blown insulation and lathe and plaster don't mix), so we aren't going to. As each room gets done, we will put up sheet insulation, and in the meantime, we dress warmly in the winter (but we don't get snow), and use a space heater (no central heat). The attic/roof insulation is something we're DIYing this year. We'll be starting with reflective roof insulation, and then maybe next year adding sheet insulation. It's much cheaper to invite my BIL over for a day of work and free food and have the two guys upstairs doing it than paying a contractor (even though DH with a power tool is a scary thought).

Honestly, I was looking at doing a kitchen remodel before this little bun arrives, but when the quotes came in, they would have wiped out both our cash and our credit reserves. That's not a place I want to approach. If you're going to do credit, be sure you can handle the payments (fixed rate, which a HELOC is not), but be sure you have cash on hand in case of emergencies. Likewise, if you're going to do cash, be sure you have credit available for emergencies. Getting yourself completely strapped and then having the tax assessor (or the termite guy, or the plumber or whomever) hand you a bill for a couple thousand is really gonna hurt.

[Sharlla]

Originally Posted by phathui5

What things do you want to do to make it more energy efficient? The things that come to mind for me (swapping out lightbulbs, replacing appliances with Energy Star ones if they die, adding insulation to an attic) are all things that are Do-It-Yourself projects that you wouldn't finance.

Well we don't live in the house yet, but we are basically gutting it, so making it energy efficient means new insulation, doors, window, house wrap, roof etc. I think after all is said and done will have cost us 15-20K Most people would take out a loan for that sort of thing.

[yakmom_8]

Leta,

Our house sounds similar to yours. We bought our 1780's house at auction in 2002. We gutted it and have slowly been renovating it. Our 1st mortgage is very low for our area. We owe 69K on our first mortgage at 4.25%. After trying to go on a cash only for the first couple years we decided that we needed to do a HELOC for several reasons.

1) major energy loss - our fuel oil bills were over 2K a year 2) we were missing windows and had wiring in PVC pipes to protect it from little hands 3) we had holes in our house that went straight to the outside 4) we were concerned that we couldn't sell our house for enough to cover our first mortgage and the cash outlay we had made for a new furnace and other renovations 5) we are older parents late 40s' - early 50's - 8 kids, first house (dh had housing as part of his salary package all of his career until 2002) - we *need* to be able to sell this house down the road - and buy a smaller house w/o a mortgage 6) we were reported to Social Services in part for renovation issues - that worked out okay but it scared us

We set up a LOC and have locked in twice once for 15K and once for 25K. I know it sounds like alot but all in all we still are out only 110K which is really very little for houses in our area. We have looked at combining our 1st mortgage and our HELOC so that we just have one mortgage but with our first mortgage at 4.25% rates we would have to get a first mortgage for 5.25% to have lower amount of interest paid out over 15years (if that makes sense)

Anyway we have done almost all the work on our house ourselves. We have completely renovated our kitchen using IKEA cabinets - including appliances we spent ~ 10K on our kitchen - it is 15' by 27' with a playloft above the kitchen. (HELOC and small inheritance of 3K)

We have put in 2 bathrooms and are currently working on a 3rd bath and laundry. (HELOC)

We have replaced flooring and sheetrock, repointed a chimney and repointed all our log walls and insulated, insulated, insulated.(HELOC)

Added 6 new windows, built a bay, 3 new doors including a french door. (HELOC)

Updated plumbing and electrical (HEL0C)

Replaced our boiler - steam heat - and added a chimney liner and wood stove (10K we paid mostly cash for all of that -used a contractor for that)

We will be signing a contract for windows in the next couple weeks (7.5K we have 25 windows -HELOC)

Sometimes I just want to quit and sell our house for less than it is worth to be done with the whole project - but we would end up with the same mortgage and a much worse living situation.... (I have even factored in spending less on energy costs but house prices have gone up so much in our area since 2002 - that we really need to finish our house to do our best when we sell) Our house would sell today unfinished for about 225K to 250K but if we finish it - we should get 350K or more. So even with interest on the HELOC and mortgage we will still come out ahead financially

Long post - but just a differant perspective -

Having a HELOC has enabled us to still have money to do some things we enjoy while continuing to invest in our house which for us is a significant part of our financial future after the kids leave home.

sheila