Advice on home remodeling financing

[Fizgig]

Hi guys... I'm a first time homeowner and I'd like some advice on remodeling.

I'd like to remodel my small kitchen and install hardwood floors next year. I'm estimating that it will cost about $11,000, so I'm budgeting for $15,000 to be on the safer side. Would you look at the numbers and give me your opinion on whether it's a good idea, if you think I can afford it, and what kind of financing options there might be?

Home purchase 10/04 - $126,000 (I got an AWESOME deal because they had fallen in love with another house and wanted to move quickly.)
Mortgage balance - $119,000
Estimated current market value - $155,000 (my estimate based on recent neighborhood comp sales)

My info:
Monthly net income - $3300
Cash savings - $8000
Saving/mo - $1000
Monthly expenses including mortgage - $2200

(My emergency fund savings goal is $12,000 and I should get there by the end of the year. Until the beginning of this year I was kind of blindly spending what I earned, but I've woken up and cracked down successfully.)

So, what do you think? I don't want to spend my emergency fund on the remodel. Home equity line?

[34saving]

No, you don't want to spend your emergency fund on the remodel. Good call A HELOC is a possibility, but with current rates at 8.25% and climbing, you might actually be better off with contractor financing or a credit card. (I can't believe I just said that!) If you pay this off in a year (which you should be able to by saving $1000 a month), a 0% for 18 month credit card might work out better than paying $1200 in HELOC financing. Moreover, a credit card is unsecured debt, which is always better than putting your house up for collateral. One more problem with a HELOC is that you might not be able to pull a $15,000 line. They're getting more conservative in their appraisals now-a-days. (I pulled a HELOC 3 years ago on a house with AT LEAST $210,000 equity and the HELOC limit was only $158,000 based on their appraisal.)

Here's one more thing to consider (though you probably don't want to). If you wait another year you can:
1) Pay cash.
2) Make sure the renovations you think you want are really the ones you want.
3) Have a great opportunity to look for clearances on flooring/appliances/the works. You can get GREAT DEALS on re-model stuff if you're patient.

[Ima saver]

I would suggest you wait another year also, prices right now are sky high. A roll of electrical wire that cost $45 last year is now $95. I lot of this has to do with the high price of gas and all the hurricanes. prices may come down next year and you will have saved enough money to do the remodel.

[DivaJen]

If you can put away $1000 a month, why not wait 12-15 months and just pay cash? Maybe do the kitchen first, then the floors? That would be the cheapest way - no interest to pay.

[terry1156]

I wouls also wait an extra year if possible. If there is a <a href="http://www.habitat.org/env/restores.aspx">ReStore</a> in your area, that can save you a lot but you'll have to take some time to find everything. Good luck.