I've had a few threads on here and I'm trying to figure out the best way to be able to afford an addition to my house. I need about $120K for this, and have thought about doing a cash out refinance. With today's rates, my new monthly payment (with tax and insurance increase assumed due to addition to house) would be about $600 more than what I'm paying now. I'm not sure if I can afford that much more a month. I do have some investments in mutual funds and stocks. Would it be a bad move to use that money to pay for some of the addition and do a cash out refinance for the difference? The housing market in my area is better than it has ever been, and I only can see it getting better.

The investments that I have were planned to be used at retirement, if needed. However, I have a pension plan for work and the wife has a 401K, and is contributing 10% to that (4% employer match). I also have a separate IRA that I contribute a little to each month. What would you do in my situation?

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Posted by LSU1018

Baton Rouge

Member since Feb 2007

7215 posts

Posted on 11/4/15 at 2:35 pm to SUB

The problem with a cash out refi is you won't get the lowest rate when you are pulling a lot of equity out.

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Posted by SUB

Member since Jan 2001

Member since Jan 2009

20751 posts

Posted on 11/4/15 at 3:22 pm to LSU1018

That's correct, but it's still better than what I'm at now (4.25).

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Posted by hungryone

river parishes

Member since Sep 2010

11987 posts

Posted on 11/4/15 at 4:16 pm to SUB

quote:
What would you do in my situation?

I'd think longer and harder about whether a $120K addition is a good idea. Would it be more cost effective to buy a different, larger house rather than adding onto the present one? Do you really NEED whatever is being added on? How long do you realistically plan to live in this house?

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Posted by SUB

Member since Jan 2001

Member since Jan 2009

20751 posts

Posted on 11/4/15 at 4:30 pm to hungryone

quote:
I'd think longer and harder about whether a $120K addition is a good idea. Would it be more cost effective to buy a different, larger house rather than adding onto the present one?

That's what I'm going through right now. The only way I can afford buying a larger house is to move to a less desirable area of town, and that's not something I'm interested in. Property values have increased so much since we bought our house (175% - 200%), that I'd get raped on the new property taxes that I'd have to pay. Adding on seems to make the most sense if I plan to stay in the same area.

quote:
Do you really NEED whatever is being added on?

Need? No, I can get by with the space I have, but would be much more comfortable with a bigger space. The reason that I'm pushing for it now is that interest rates are some of the lowest they've ever been, but from what I've read, the fed is likely to start increasing its rate next year. I'm worried that I may need this bigger space later on, but interest rates may be higher and make it even less affordable.