HELOC - Would this benefit us?

**MomToTwoBoys** · 11-08-2009, 04:58 PM

We're planning on remodeling two bathrooms (actually, 1 and a half bathrooms) from the studs up. We also need to do some minor fixes around the house in order for it to be sell-ready in the spring/summer.

I'd flirted with the idea of a HELOC to help us renovate. We'd take out the HELOC, then when the house sells we would pay it off completely with a chunk of the profit.

We're currently in the midst of paying off the inlaws from a previous loan. This HELOC would keep us from having to borrow from the inlaws and borrow at a low interest rate. The loan would be short-term and paid in full come sale time.

Would we benefit from getting a HELOC now and having all of the renovations done before Feb 2010? Canada Revenue Agency is offering a home improvement tax credit if renovations are made before Feb 2010... just save all of the receipts and file them with the taxes.

**itlw8** · 11-09-2009, 10:15 AM

Look closely and do not jump too fast. will the improvements increase the value of the house.

Are you underwater with the mortage as it is now? what are houses selling for in your area now.

Do all the research for the area it would be horrible if you do the work and sell the house and then still owe this money long term.

**MomToTwoBoys** · 11-09-2009, 11:16 AM

We bought the house in July 2005 for $131,900 and put $13,500 on it for 10% down. We currently owe $105k on it after paying off $15-$18k in the last five years. Properties in our neighborhood that are comparable are going for $259k-$279k and this is the winter season. The prices will go up in the spring and summer.

We're looking to spend at max $15k on realtor fees, then another $5k on closing costs. If the house sells for $280k, we'll have a $150k profit on the house (which we were going to use to pay 50% off of the second mortgage without having to take out the HELOC).

DH told me that he's concerned that we'll fix the house up to the point where we won't want to leave. We're just figuring things out right now while he bides his time in going to the warehouse where he'd get the transfer. He goes there for a week at the end of November for some work, so he told me he wants to see if he likes it there before he leaves here. That's completely understandable.

The HELOC would be for a max of $15k. We're budgeting $10k for the bathroom and $2-$5k for the downstairs half bath but those are at the high end of the spectrum.

**monkeywrangler71** · 11-09-2009, 11:39 AM

My main concern would be whether the repairs would add as much value as they cost. You might want to get an agent in to assess what price you should list at and how much higher that would go with the repairs. If the repairs cost $15k and only increase your value by $5k, you've basically just flushed $10k down the toilet.

**MomToTwoBoys** · 11-09-2009, 02:47 PM

Originally Posted by monkeywrangler71

My main concern would be whether the repairs would add as much value as they cost. You might want to get an agent in to assess what price you should list at and how much higher that would go with the repairs. If the repairs cost $15k and only increase your value by $5k, you've basically just flushed $10k down the toilet.

I'm concerned with whether someone's going to buy the property as is. I guess we could price it at the low end of the spectrum and put it as an 'as is' property, then let someone else shoulder the costs to completely redo the bathrooms. I'm not certain that in this economy, it would be good for the market to sell the house as it is now.

There's significant water damage in the upstairs bathroom. There's a bit of renovating that the downstairs bathroom needs, but it's not as important as the upstairs bathroom.

I'll check on how much value the renovations will add to the price of the house and whether it's worth it.

**MomToTwoBoys** · 11-10-2009, 01:38 AM

DH and I had another enthralling conversation about renovations, the costs and what we can do to make the house more appealing without breaking our budget.

He and I agreed that me going back to work part-time to fund the renovations might not go so well, in relation to our current home life. It would take me away from devoting so much time to our gluten-free diet lifestyle as well as the upkeep of the house. Also, if I went back to work to fund the renovations then I would have to pay someone else to come and do them... which would cost us more.

So our partial solution is to have me do the little renovations like painting and fixing small holes. I could also hang the trim in the downstairs, install new cabinet handles, repaint the cabinet doors, etc. The larger projects, like the bathrooms and the installation of new doors for each room, would be DH's job.

Also to help us fund our project(s), we decided to buy each item when it's on sale or see if we can get a special deal on floor models. This would be for things like the vanity in each bathroom, tiling, trim, etc. If we buy things a little at a time and store them downstairs in the larger part of the basement, then we can put everything in when it needs to be put in.

This may or may not help us take off the burden of having to take out a HELOC.

**savvy_sniper** · 11-10-2009, 09:23 AM

I like that idea MUCH better!

Good Luck!

**Greebo** · 11-10-2009, 10:00 AM

A HELOC in a time where real estate has been receding in value?

No - I think not...

I know you're in CA - so different factors - but still, why risk creating a situation where you're locked into your house because you end up owing more than the value in a year.

**itlw8** · 11-10-2009, 11:18 AM

10,000 is a MAJOR remodel are the bathrooms that large? or are you doing more upgrading than repairs.

If you are doing most of the work yourself 10,000 is a mighty fancy bathroom some things you have to hire out like a plumber and electrition but others you can do yourselves with a little knowledge.

fixing water damage is important fancy tile and a fancy tub are not when you have to borrow the money

**MomToTwoBoys** · 11-11-2009, 12:41 AM

Nah, the main thing is the repairs. The bathrooms need new subflooring, new tiling, new plumbing for the shower since the shower is outdated, etc. It also needs a new vanity because of water damage at the bottom of the current vanity. The half bathroom also has water damage on the floor and the ceiling, so everything needs replacement in there except for the toilet.

I'm debating approaching DH about vinyl roll tile instead of spending a ton of new ceramic tile. It's not like we're doing these improvements for our enjoyment.

The other part of our budget for improvements goes into replacing the kitchen countertop because of water damage near the faucet. There are also quite a few gashes in the countertop as well.

I think we're gonna save our countertop replacement for tax time. Most of everything we're doing now is going to be little by little. I think this will take the stress off of us for having to take out a HELOC.

**Greebo** · 11-11-2009, 05:59 AM

Is this a DIY project, are you hiring out, or is it a mix?

Materials wise - subflooring, waterproofing and tiling, if you do it yourself and don't go insane - I'm thinking about $1000.

Plumbing - are you talking fixtures? Or actual pipe replacement? Fixtures are easy - $100-$150. Pipes on the other hand - plumber will run you $1000 if you do the wall opening up yourself, I think.

Vanity? How big? That'll impact the size, but you can find vanity/counter sets complete for anywhere from $150-$500 iirc.

Finally - if you're only doing this to sell - put it up an as-is fixer and make sure the realtor notes in the listing that the price is adjusted to account for the damages. Figure the market value undamaged - and take off 50% of the estimated repair costs. Any offer that comes in low but within 100% of the costs, take it - assuming you can clear the mortgage.

Why do I say that? Because someone who wants a fixer would rather they got to pick the tile and sink and fixtures. Someone paying top dollar, otoh, isn't going to want the cheapest fittings and materials you could find.

My $0.02.

**Thevail** · 11-13-2009, 05:26 PM

If you want to sell the house, don't put any more money into it than you HAVE to. It's like fixing a used car perfectly to sell as a used car.

Someone did some upgrades to our house just before we bought it. We ripped them out and did them our way, which I think a lot of people do. It's thrifty if I choose the cheapest pedestal sink I can find on sale.. it looks cheap if you did it before I got there..

It's all so relative. And I'd definitely go for the linoleum option over tile. Tile is so horribly cold on bathroom floors..

**monkeywrangler71** · 11-13-2009, 05:37 PM

What caused all this damage? and has that been fixed?

**Pianolady** · 11-14-2009, 09:44 AM

I'm assuming the subfloor damage was due to a previous problem? Is the floor "spongy" or uneven? If so, yes this might be something you need to fix before trying to sell the house. That is something I'd notice right away, especially if on a 2nd floor instead of on top of a concrete slab.

We've redone 4 bathrooms in 3 different homes now DIY. The average cost for a complete gut ran about $2k-$2.5k. We can do our own plumbing and tiling though, so that makes a big difference.

If selling, I would forget the tile (unless it's your shower), and use drywall and linoleum, except in the shower. If you want to avoid tiling the shower, look into a mid-range surround (not the cheapest ones). Square tile linoleum may be cheap and easy, but are terrible in bathrooms, and could be a minus if a seller sees it and knows it's a bad idea.

Avoid the very cheapest linoleum too. If you've seen the linoleum in a camper/trailer, it doesn't belong in your house! My parents bought a new home with linoleum in the bathrooms just like the linoleum in our pop-up camper. It looked terrible within a year. People will notice if you go too cheap.

**MomToTwoBoys** · 11-14-2009, 05:32 PM

Actually, the damage was due to water problems with the toilet and the sink. It happened after we got here. Little kids with Tinker Toys and bathrooms do not mix...

The floor in the upstairs bathroom is uneven. The floor in the downstairs half bath is just atrocious.

We're planning on a tub surround for the shower walls. I don't want to mess with tiling it, especially since the grout is a harborer of mold and mildew.

The absolute things that need replacement are as follows:

1) The full bathroom vanity.
2) The shower head/faucet.
3) The subfloor in both the half bathroom and the full bathroom.
4) The tile in both bathrooms.

We could replace the lighting and the mirrors in the bathrooms, but we figure that the new owners could do that. If it was up to me, I'd let them pick the vanities and everything and just leave the shower and the toilets with the new flooring.