What say the hive? The HELOC gives me the flexibility to spread out purchases/payments. It's variable rate however (currently 2.99 intro rate for 12 months, then goes to 5 but could go higher). The loan gives a better rate (4.75), but start paying on the full amount at day one. Is $20-25K enough for a 24 x 30 single story on a slab? I'm looking at metal, stick build, or prefab.
Very no. Variable rate is the kiss of death. That’s how everybody lost their houses circa 2008.
I was just quoted 25k for 24x36 pole construction addition to my current garage and a 10x32 lean to on the side, metal walls and roof, 12’ tall for lifts, with concrete. I talked to the bank about a heloc and refi, and both options made me sick. It made more sense after doing the math to pay with credit, do a 0%apr transfer(3% fee) 5 times and pay it off over 5 years. Same payment per month had it paid off 6 months quicker on credit card versus the home equity line.
Also variable rates are the devil
Construction costs very widely depending on location and specs. The only way to get even a ball park estimate is to talk with someone in your area who either builds or has had built something pretty darn close to what you're looking for. If you want real prices then you need to put a bid package together and get some bids.
As far as financing options are concerned I'd to the HELOC if I could pay it off while the rate is locked. Otherwise I'd do home equity. Actually I'd wait till I could pay cash which is why seven years in I still don't have a shop at my new house.
Will the garage add enough equity that you could do the 2.99 then refi the whole thing? Rates have been coming down.
Patrick said:I was just quoted 25k for 24x36 pole construction addition to my current garage and a 10x32 lean to on the side, metal walls and roof, 12’ tall for lifts, with concrete. I talked to the bank about a heloc and refi, and both options made me sick. It made more sense after doing the math to pay with credit, do a 0%apr transfer(3% fee) 5 times and pay it off over 5 years. Same payment per month had it paid off 6 months quicker on credit card versus the home equity line.
Also variable rates are the devil
That’s exactly how I financed the tear down and new construction of my house. I used 0% credit cards to buy materials and the tools needed to build it. When the one or two years of interest free was up I accepted the next 0% long term card offer and rolled everything into that one.
By doing it that way I didn’t have to jump through all the hoops banks require when getting a construction loan. Multiple bids from contractors, committee approval of every variation and change, variable rate until construction is completed.
Plus it’s secured by your credit not your home. If events happen you aren’t foreclosed out of your house. Yes your credit will take a hit but remarkably not a very big one.
The one thing you have to do is get written permission to tear down your house ( or part of your house) from the mortgage holder. I got around that by doing most of the work I could prior to tear down. Then documenting everything done to the point where tear down had to start. Pictures and everything.
They perceived it as a no risk approval since much work was done and signed off my city officials. I was given verbal permission to proceed and written arrived a few days later.
An addition doesn’t require approval by the mortgage holder. But tear down ( removal of their asset ) does.
Most heloc lines are “prime plus x” and prime rate is unlikely to go up a lot in the next few years. How long would you plan on carrying the note?
Do not variable rate period
I used a line of credit to build my shop, then rolled it into a re-mortgage of the house when it was done.
Credit card special offers can be great if you plan to pay them off in a year. But they’re the ultimate in variable rate badness. If you can’t transfer to another low rate offer you end up at what 12% if you’re lucky, 19% if you’re typical, and 29% if something’s gone wrong.
The HELOC would be 5% after a year so long as prime doesn't change or change much. I could not pay off in first year at the lower (2.99) rate regardless.
With the HEL instead we could refi now and include the additional cost of a garage, but would extend our payback about an additional three years unless over paying on our monthly. I'm leaning this way but wife doesn't want to add more time to our payback if possible.
General contractor supposed to come out tomorrow to look at site.
MrSmokey said:Do not variable rate period
Variable rate can be a useful tool as long as you go in with your eyes open. Look at the terms on the loan, there's usually a limited range within which it can vary. Look at the maximum payments, run the worst-case scenario, then decide.
The problem in 2008 was not variable rate by itself, it was by people not understanding how the loans worked but signing the paperwork anyway.
codrus said:MrSmokey said:Do not variable rate period
Variable rate can be a useful tool as long as you go in with your eyes open. Look at the terms on the loan, there's usually a limited range within which it can vary. Look at the maximum payments, run the worst-case scenario, then decide.
The problem in 2008 was not variable rate by itself, it was by people not understanding how the loans worked but signing the paperwork anyway.
The real problem was the banks and credit unions. In the past, once a loan was granted you could be reasonably certain to be able to refinance as long as you still had equity.
The banks failed to do their due diligence and worse they forced rating agencies into a position where survival meant approving anything the banks wanted.
In 2010 with more than 50% equity in my home I asked the bank ( Credit Union ) I’d been doing business with for 30 years for a interest only temporary modification to my mortgage.
I was not late, had excellent credit score, and hadn’t ever had as much as a bounced check.
Three days later the credit union Representative knocked on my door with the Sheriff in Tow and asked if I was ready to vacate the house.
If I’d said yes they stood to profit more than 1/2 million dollars. Which they needed because they had recently been purchased.
Banks and the banking industry made serious mistakes This was far from the first time and it darn sure won’t be their last.
Patrick said:I was just quoted 25k for 24x36 pole construction addition to my current garage and a 10x32 lean to on the side, metal walls and roof, 12’ tall for lifts, with concrete. I talked to the bank about a heloc and refi, and both options made me sick. It made more sense after doing the math to pay with credit, do a 0%apr transfer(3% fee) 5 times and pay it off over 5 years. Same payment per month had it paid off 6 months quicker on credit card versus the home equity line.
Also variable rates are the devil
Today I learned you can transfer credit debt to different cards and pay a relatively low few to do so.
maschinenbau said:Patrick said:I was just quoted 25k for 24x36 pole construction addition to my current garage and a 10x32 lean to on the side, metal walls and roof, 12’ tall for lifts, with concrete. I talked to the bank about a heloc and refi, and both options made me sick. It made more sense after doing the math to pay with credit, do a 0%apr transfer(3% fee) 5 times and pay it off over 5 years. Same payment per month had it paid off 6 months quicker on credit card versus the home equity line.
Also variable rates are the devil
Today I learned you can transfer credit debt to different cards and pay a relatively low few to do so.
Sometimes you can’t roll over to another card if they are the same type card. I got caught in that once.
dculberson said:Credit card special offers can be great if you plan to pay them off in a year. But they’re the ultimate in variable rate badness. If you can’t transfer to another low rate offer you end up at what 12% if you’re lucky, 19% if you’re typical, and 29% if something’s gone wrong.
This is true. But it's been my experience the last 10 or so years, that if you have a good credit score, decent income, and a balance on one card, it's not hard to get a transfer offer.
z31maniac said:dculberson said:Credit card special offers can be great if you plan to pay them off in a year. But they’re the ultimate in variable rate badness. If you can’t transfer to another low rate offer you end up at what 12% if you’re lucky, 19% if you’re typical, and 29% if something’s gone wrong.
This is true. But it's been my experience the last 10 or so years, that if you have a good credit score, decent income, and a balance on one card, it's not hard to get a transfer offer.
I agree with that. But frenchy was advocating for them using "what if stuff goes bad" - in which case the enormous balance on a credit card with accelerate the bad stuff.
If your credit card is large enough and you don't mind paying extra and often, I'd go w/ the credit card option.
You can open up another credit card and get that 0% APR for 15-18 months if you have good credit. THEN, if it's still not paid off by then, you're also likely getting offers from Capital One or Citi, trying to get you to do a balance transfer offer of 0% APR for another 15-18 months, but a 2-3% balance transfer fee.
Rinse and repeat if need be.
Personally, I wouldn't bother w/ the 12 month offers as 15-18 is common enough.
Not GREAT financial advice, but it's something.
I used credit card balance transfers to purchase the empty lot next to my first house. It kept a double wide from being put there, kept all the awesome trees that were on it, and saved me a couple thousand dollars in loan origination fees, appraisals, etc. I wasn't able to do it all interest free, but the rates started at 0% and only went above that for a short time. I was able to pay it off in a couple years and look back on it as a good financial decision.
z31maniac said:dculberson said:Credit card special offers can be great if you plan to pay them off in a year. But they’re the ultimate in variable rate badness. If you can’t transfer to another low rate offer you end up at what 12% if you’re lucky, 19% if you’re typical, and 29% if something’s gone wrong.
This is true. But it's been my experience the last 10 or so years, that if you have a good credit score, decent income, and a balance on one card, it's not hard to get a transfer offer.
I agree with that. But frenchy was advocating for them using "what if stuff goes bad" - in which case the enormous balance on a credit card with accelerate the bad stuff.
When things go bad. What I was talking about there, is like in 2008 when the banks screwed up the economy so bad. I should have declared bankruptcy and all that credit card debt would have just disappeared. I would have lost nothing.
Yes my credit would have a black mark on it. ( disappeared a few years ago) But a really serious debt would have been removed from my shoulders.
Instead, because I’m honest, I Rolled it over into mortgage debt. Mortgage debt can be foreclosed on, not so credit card debt.
dculberson said:I used credit card balance transfers to purchase the empty lot next to my first house. It kept a double wide from being put there, kept all the awesome trees that were on it, and saved me a couple thousand dollars in loan origination fees, appraisals, etc. I wasn't able to do it all interest free, but the rates started at 0% and only went above that for a short time. I was able to pay it off in a couple years and look back on it as a good financial decision.
I have my eyes on six acres about an hour away from me. The seller only wants something like, $6k for it.
Might just do the same thing.
Will they offer loans on a canoe?
Wow, first thread I've ever had that got canoed. I'd that a real word? Spell check didn't hate it.
Check the rates/terms on Lightstream.com. Not a canoe!
Fuzzy — a grand an acre is a steal in my area. I wish I could find a deal like that!
If they only want $1,000/acre you better look at that land REALLY good. Then go to your county’s GIS website and research the property there. Check out the layers for wetlands, topography, flood plains etc. I used to do environmental assessments and we always had a tough time convincing people that under priced property can be a red flag. One guy bought a finish and dye plant without doing any assessment because the price was “too good to pass up”.
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