Alternatives to home equity loans?

ThriftoRama · #1 (**permalink**) 04-16-2008, 12:00 PM

Hi All. I have blogged about my sister, who is not so good with money. She has it in her head that she want to move, despite the down housing market. I convinced her to stay put until the market rebounds, but realistically her house needs serious work before anyone will buy it.

She needs about $3200 for new Energy Star windows. She wants to take out a home equity loan. I really don't want her to take on any more housing debt. She has refinanced the loan twice in the last 5 years and I don't think she has any equity to tap, frankly. Plus, I don't want her to put her house on the line by tying more debt to it.

So, my question is...

Are there alternative ways to finance home improvements? She can't afford to pay cash and frankly doesn't have the discipline to save up for bigger projects, and I am reluctant to use HELOCS or credit cards (unless it's zero percent for a year or so...)

Any ideas would be super helpful.

jIM_Ohio · #2 (**permalink**) 04-16-2008, 12:34 PM

cash

I would avoid giving family financial advice unless they ask.
And you are not responsible for bailing them out if they fall flat on their face either.

bjl584 · #3 (**permalink**) 04-16-2008, 12:51 PM

Honestly, there isn't much you can do for her. You said that she doesn't have the discipline to save. Until that changes, all the refinancing tricks in the world won't matter. She needs to get a handle on her finances and take reponsibility for them before she does anything else. After she sets up a budget and gets a plan to get out of debt she can work at it, then after some time passes and she gets her head above water, then she can revisit the idea of moving. For now she should stay put and get a handle on things.

disneysteve · #4 (**permalink**) 04-16-2008, 02:21 PM

Quote:

Originally Posted by ThriftoRama

Are there alternative ways to finance home improvements?

The window company may offer their own financing plan. If not, she can probably find one that does. Whether or not it is a good idea is a whole different question, but if she can qualify for credit, she should be able to find a way to pay without involving her home.

ThriftoRama · #5 (**permalink**) 04-16-2008, 03:24 PM

I only ask because she wants to use home equity, and frankly, I don't think it;s feasible given the housing market and her recent refinance. She asked me to look into it.

Moving would be good for her in the long run. She to drive an hour each way to her job every day plus she is terrible at home maintenance. She wants to move close to her job and into a condo, where she won't have to worry about the big maintenance items. It would save her a lot.

Daylily · #6 (**permalink**) 04-16-2008, 04:44 PM

Why doesn't she just try selling the house as-is ?

ThriftoRama · #7 (**permalink**) 04-16-2008, 05:30 PM

We just refinanced her out of a predatory subprime loan last year and frankly, considering how bad the housing market is here in Ohio I think she's still owe money on the house (after paying the realtor) if she sold it now. It also needs work before it will sell.

JBL · #8 (**permalink**) 04-16-2008, 05:54 PM

If she can sell with a small loss, and move to a condo that is cheaper than the house she has now (dont forget to factor in how much that hour commute costs!), she may be better off to just sell as-is at a loss and move on. Definately better to do this than to keep borrowing and throwing money into the house. I doubt that the housing market is going to rebound anytime soon. Sometimes it is better to cut your losses and move on. I did this last year and it has given me incredible peace of mind...

That being said, she may be able to join a credit union who can probably give her a loan with a short term payback period which would be better than a longer term commercial home equity loan. My credit union will write small home equity loans with specific payback periods of whatever works. They are very flexable. I could borrow $3000 and pay it back in 6 months if I wanted, at a fixed interest rate. Maybe something like this would work for her.

Often it is cheaper long run to fix up, reglaze, weatherstrip, and storm window the windows you already have than to replace. Replacement windows rarely end up paying for themselves.

ThriftoRama · #9 (**permalink**) 04-16-2008, 06:00 PM

The credit union is a great idea.

My worry about selling this house and getting no equity -- it seems that lenders want people to have a down payment before they will do a loan, and if she sells at a loss, she won't have anything to put toward the condo and might not qualify for a loan...

maat55 · #10 (**permalink**) 04-16-2008, 06:48 PM

It sounds like she needs to get on a beans and rice budget and learn to save money. She can sell stuff and get a second job if possible. Selling houses and buying houses is not something to do broke. That's the advice you should give her.

ThriftoRama · #11 (**permalink**) 04-17-2008, 12:19 PM

I've already tried. She just doesn't want to hear it. She doesn't want another job. She rarely even opens her bank statements because thinking about it "give sher a headache..." It's a losing battle.

Brokemofo · #12 (**permalink**) 04-17-2008, 12:51 PM

Quote:

Originally Posted by ThriftoRama

I've already tried. She just doesn't want to hear it. She doesn't want another job. She rarely even opens her bank statements because thinking about it "give sher a headache..." It's a losing battle.

In that case, it's time for tough love buddy. Tell her you will not continue to be part of the problem, and she must do whatever on her own. Stop enabling her to continue in the manner she is used to.