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Started By
Message
I come to the Money Talk for advice - Home equity Loan/HELOC/Other Options
Posted on 10/16/17 at 8:49 am
Posted on 10/16/17 at 8:49 am
Money guru's, I need advice.
I live in a house I don't plan on moving out of. This is our permanent home. I'm looking to build a garage in the back yard. It's going to be of decent size....800sqft or so. It's going to cost about 40k or so (swag estimate). I don't mind paying a long term loan since we will be there permanently and I don't want a $600 note for the next 5 years
We just got the PMI off the mortgage, and I know my choices are a HELOC/home equity loan. Anything else to consider? I got a quote on HELOC and just don't like the idea of a variable rate for the next 20 years.
Just doesn't seem like I have very many options. I know the garage doesn't add enough to the house to qualify for a new construction loan (so I've been told). Maybe I shouldn't build it at all.
I live in a house I don't plan on moving out of. This is our permanent home. I'm looking to build a garage in the back yard. It's going to be of decent size....800sqft or so. It's going to cost about 40k or so (swag estimate). I don't mind paying a long term loan since we will be there permanently and I don't want a $600 note for the next 5 years
We just got the PMI off the mortgage, and I know my choices are a HELOC/home equity loan. Anything else to consider? I got a quote on HELOC and just don't like the idea of a variable rate for the next 20 years.
Just doesn't seem like I have very many options. I know the garage doesn't add enough to the house to qualify for a new construction loan (so I've been told). Maybe I shouldn't build it at all.
8
Posted on 10/16/17 at 8:56 am to Black
quote:
Maybe I shouldn't build it at all.
If you don't have the funds (or access to reasonable financing) to do so, I think this is the best plan for now.
It doesn't sound like you have much equity built up yet, so you would likely need a fair amount of cash anyways.
Posted on 10/16/17 at 9:01 am to Black
My suggestion would be to save money for about two years or so that you can pay for it with straight cash versus taking out a loan.
I am doing a backyard project right now with building an outdoor kitchen that will end up costing me around $30k. I'm doing some of the work myself and contracting other pieces out to speed up the project. When I was looking for ways to finance my project, I settled on just saving up for it for a couple of years. I saved money on interest and fees and when it's over, I don't have anything to repay. I know this isn't the popular option with the "instant gratification" culture we live in today, but it's the most fiscally responsible option IMO.
I am doing a backyard project right now with building an outdoor kitchen that will end up costing me around $30k. I'm doing some of the work myself and contracting other pieces out to speed up the project. When I was looking for ways to finance my project, I settled on just saving up for it for a couple of years. I saved money on interest and fees and when it's over, I don't have anything to repay. I know this isn't the popular option with the "instant gratification" culture we live in today, but it's the most fiscally responsible option IMO.
This post was edited on 10/16/17 at 9:03 am
Posted on 10/16/17 at 10:17 am to Black
don't spend money you don't have.
Posted on 10/17/17 at 10:22 am to Black
If the rate on the loan is good enough, there's nothing wrong with going that route. If you're itemizing on your return, you can deduct the interest which makes it even better.
That said, if you only just now paid off your PMI you may not get a good deal. You can always ask your local bank though, they're always eager to discuss options and it's free to ask. Just be aware they're trying to find a case to make it work, it's up to you to decide whether the terms they offer are good for you.
That said, if you only just now paid off your PMI you may not get a good deal. You can always ask your local bank though, they're always eager to discuss options and it's free to ask. Just be aware they're trying to find a case to make it work, it's up to you to decide whether the terms they offer are good for you.
Posted on 10/17/17 at 10:33 am to foshizzle
quote:
If the rate on the loan is good enough
i'm assuming you're talking about a home equity loan. I haven't gotten the rates on those yet, just the line of credit. I got 7.74% on the line of credit. I don't like the variable rate though. This is all Greek to me, so sorry if i'm not understanding right off the bat
Posted on 10/17/17 at 11:06 am to Black
Lightstream offers unsecured loans for highly qualified borrowers for home renovations.
We have used them for a $25,000 loan for home renovation projects and borrowed for 36 months at 3.99%.
Downside is obviously the interest isn't deductible, but we're going to be paying it off in less than two years, so I'm not too concerned.
We have used them for a $25,000 loan for home renovation projects and borrowed for 36 months at 3.99%.
Downside is obviously the interest isn't deductible, but we're going to be paying it off in less than two years, so I'm not too concerned.
Posted on 10/17/17 at 1:36 pm to Black
quote:
i'm assuming you're talking about a home equity loan.
I'm talking about anything backed by home equity, whether it's a straight loan or a line of credit (HELOC).
quote:
I got 7.74% on the line of credit.
I wouldn't borrow at a rate that high at all. I'm guessing that's an unsecured rate b/c your equity is low, a regular HELOC rate is usually far lower.
Posted on 10/17/17 at 3:08 pm to foshizzle
quote:
I'm guessing that's an unsecured rate b/c your equity is low, a regular HELOC rate is usually far lower
That was the quote I got from Capital One on a LONG term loan. I went online and saw a couple that gave me a rate in the 5.5 - 6.5 range
Posted on 10/17/17 at 3:42 pm to Black
save the money then build the garage.
Posted on 10/17/17 at 4:06 pm to Black
I have no idea how much your property is worth, but if you only have around 20% equity in your property. Do you really want to borrow 40K against that equity to build something that "doesn't add enough to the house to qualify"?
Posted on 10/17/17 at 4:16 pm to TigerintheNO
quote:
Do you really want to borrow 40K against that equity to build something that "doesn't add enough to the house to qualify"?
I get that point of view, but i'm not leaving, so if it doesn't add value to my house, I really don't care. Maybe it's the wrong way to think....but it's true. It doesn't bother me at all.
Is there something else I should be considering in that it should bother me? And I don't understand how an additional 800sqft doesn't add value when it will possibly be a living area in the future
Posted on 10/17/17 at 8:15 pm to Black
Outbuildings don’t provide the ROI on a home compared to what you spent on them. Just the truth.
Have you considered refinancing and just pulling the equity out on a first lien product? You may incur MI again but the rates are incredibly low and even on a smaller amount that 2nd lien product would push your blended rate over what you’d get by just cashing out and refinancing the first MTG.
Have you considered refinancing and just pulling the equity out on a first lien product? You may incur MI again but the rates are incredibly low and even on a smaller amount that 2nd lien product would push your blended rate over what you’d get by just cashing out and refinancing the first MTG.
This post was edited on 10/17/17 at 8:16 pm
Posted on 10/18/17 at 6:24 am to GFunk
quote:
Have you considered refinancing
I have, but I just don't know much about it. I know I have a 3.65% interest rate on my current mortgage. I think refi %'s aren't much higher. I wouldn't be against it as long as it doesn't push my note crazy high
Posted on 10/18/17 at 7:03 am to Black
The problem with a cash out refinance is that you would pay a higher interest rate than even the going rate. The good part is that it would be a locked interest rate.
Posted on 10/18/17 at 7:13 am to Black
It should be noted that I'm guessing on the value of my house. I'm basing it off of what it appraised at in 2012 at the time of closing. It could be more, could be less(which i'm hoping it isn't b/c a house across the street that is smaller sold for more than what mine appraised at)
Posted on 10/18/17 at 2:55 pm to LSU1018
quote:
LSU1018
quote:
The problem with a cash out refinance is that you would pay a higher interest rate than even the going rate. The good part is that it would be a locked interest rate.
When you blend the two rates of the locked 1st and (even with) a locked 2nd, I'd imagine at current rates he could cash out for a fixed rate product and save money over the life of the loan doing it with a first-lien position product that just stripped some equity.
Posted on 10/18/17 at 7:31 pm to Black
I think you’re worrying too much. 40k for 800 sq ft is high. I’m assuming you’re a fairly high earner. You should be able to float with the HELOC for a few years. If rates bump quick, you can pay it down faster. It’s only 40k. You sound like you really want the addition and only hope to finance long term. That denotes a choice. Take the chance for a long term deal but prepare to pay it off early if rates change the calculus.
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