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[ThatStupidLion]

Hey homeowners!

US owner here. I’ve got a quick question about a large scale full reno my wife and I are planning within the next year or two.

what is the better course of action:

Put 100k+ into our principal and take out a heloc when we are ready for the reno

Or

Take out a heloc on our future current mortage and use the 100k+ directly on the reno.


Cheers

 

[MikeM]

Hey homeowners!

US owner here. I’ve got a quick question about a large scale full reno my wife and I are planning within the next year or two.

what is the better course of action:

Put 100k+ into our principal and take out a heloc when we are ready for the reno

Or

Take out a heloc on our future current mortage and use the 100k+ directly on the reno.


Cheers

I’d ask an accountant. I believe the US has tax laws allowing for interest write off if I understand it correctly. Canada doesn’t allow it unless you use your home for business.

The other part is mental- can you sleep at night losing $100k of liquidity out of your bank account right now?

Given the rate of return on T-bills etc, would it make sense to invest that $100k for two years until you need the money for the reno?

 

[AJUMP23]

If you have 100K where are you getting it from?

Some of it depends on the interest rates. Right now rates are very high, so getting a HELOC will be expensive. Granted if you have 100K cash some where there is a lot of good growth funds to stick it in and counter the interest you would be charged on a loan.

100k at 7% cost you 53k in interest over 5 years. That is more than half your loan going to interest. That is a lot of money. Maybe you should look at doing it in pieces.

what is your loan interest rate right now on the principal. If it is 4% or below, you would do better to invest the 100k, because at 4% that is pretty inexpensive money. I am at 3.2% and I got a home loan 3 years ago.

You have to decide with your spouse how best to spend your money. What is important, and what matters. A HELOC can be good but it will cost you. I would not pay down principal unless I had a high interest. You might also look at a conventional loan. see what is out there. Also if you are not investing for retirement, you need to take some of that 100k cash and put that in a Roth IRA.