Paying for a small-ish remodel...need advice

My wife and I are planning a kitchen remodel, and need some advice on how to pay for it. I'll be doing all the work myself, so I have the option of spreading costs out - e.g. I don't have to buy all the appliances right away, as we could delay purchase of new by continuing use of what we have.

Budget works out to be ~$17k all in, with contingency. To be honest, I could almost pay this in cash, but it would eat all my reserves/savings accounts. Not too fond of that idea.

Should we go talk to the bank that carries our mortgage and see if we could do a line of credit type thing (pardon my ignorance)? We refinanced about a year ago to increase our payment and reduce the length of the loan. We're down to about 12 years left, and this is our only debt.

Should I just get a credit card with zero/low interest for a year or some other introductory offer? We currently do not have any credit cards.

Should I pay for half in cash and finance the rest?

Whatever option we choose, I'd like to pay it all off within a year. I've paid cash for everything all my life (aside from the house, of course), so I'm pretty ignorant about lending/borrowing.

What is the LTV ratio on the mortgage. If its under 70% you can do a quick equity loan, or a 401K loan from yourself and write off the interest.

I have always been told to to be careful with those 401K loans.

Datsun310Guy wrote: I have always been told to to be careful with those 401K loans.

You do need to be careful. If you lose your job it has to be paid in full and you can only pull between 10-20% of the total 401K value. Mind you most pope don;t have much in the 401K but I hoard money it in like crazy for the tax benefits.

But for a kitchen where you are going to get hopefully more then the 17K you spent back in equity its not the end of the world. Plus if you itemize you can writeoff the interest.

If you have really good credit companies like Lightstream will make unsecured loans at very low interest rates.

Also, interest on a 401(k) loan isn't deductible even if you use the proceeds to improve your house. The loan has to be secured by the property and a 401(k) loan isn't.

wearymicrobe wrote: What is the LTV ratio on the mortgage. If its under 70% you can do a quick equity loan, or a 401K loan from yourself and write off the interest.

I just googled LTV ratio, and according to an online LTV calculator, we're in the 50-60% range depending on actual appraisal value. House has not been appraised since we bought it, aside from the annual County appraisals that do not consider/factor the improvements we've made to the house and property.

So an equity loan might be a good approach? Can one of you outline what that looks like in terms of effect on monthly payment and life of loan, keeping in mind you're speaking to a total neophyte? Thanks!

Credit union HELOC is Miata here.

Mezzanine wrote:

wearymicrobe wrote: What is the LTV ratio on the mortgage. If its under 70% you can do a quick equity loan, or a 401K loan from yourself and write off the interest.

I just googled LTV ratio, and according to an online LTV calculator, we're in the 50-60% range depending on actual appraisal value. House has not been appraised since we bought it, aside from the annual County appraisals that do not consider/factor the improvements we've made to the house and property. So an equity loan might be a good approach? Can one of you outline what that looks like in terms of effect on monthly payment and life of loan, keeping in mind you're speaking to a total neophyte? Thanks!

A Home Equity Line of Credit (or HELOC) would be a completely separate loan and transaction from the mortgage on your house, even though it is secured by the same piece of property. It can even be from a different lender from the one that holds your mortgage. Your primary mortgage wouldn't change at all by getting one, because the HELOC would be a totally separate transaction.

You did say that you recently refinanced the primary mortgage to a shorter term with a higher payment. Would going back to a 30-year loan free up enough cash flow to pay for this? With most mortgages, one can pay extra over the typical monthly payment without a penalty - and the extra would get applied directly to your principal balance.

I've used a line of credit in the past and it worked out fine for me.

Thanks for the help everyone - we've got an appointment with the bank to discuss tomorrow!

Make sure you shop rates. Bank of America, where my checking and savings accounts reside, has me in some kind of "premium" category - yet their HELOC rates were turrrrrible compared with the local credit union.

+1 for "Check with local credit unions"