How to finance home improvement project?

**bjl584** · 07-06-2014, 03:23 PM

How critical is the home improvement project? How long would I take you to save up the required $11,000?

I absolutely would not borrow from retirement for a home improvement project.

A HELOC would be a better route to take if the work absolutely needs to be done in the short term and you don't have the cash. I'd suggest borrowing what you need and then closing the account so that you can't borrow any more. It will keep your hands out of the cookie jar so to speak. Then you can focus on aggressively paying it off.

**edg126** · 07-06-2014, 06:56 PM

We are just wrapping up a 14K home improvement project. There's been major cost runoff even though there haven't been big setbacks, just replacement parts more expensive than we anticipated.

I sold shares of my company stock that I purchased through an ESPP that I had been meaning to sell. Then the project from start to finish took 6 weeks of contractor time plus 2-3 weeks before he started to pick things out. So over that 9 week period we went even to harder frugal mode to cut back expenses, and came up with some more money.

It's a powder room, laundry room, and hallway gut and remodel, down to the studs. It started when the toilet was wobbly and I saw the floorboard rotted away (previous owners did a shoddy installation). So it was sudden, but we were complaining about that side of the house all winter being freezing and wanted to fix everything and do it right.

If we didn't have the cash, the contractor would have done it for probably $1000. Get a new toilet, have plumber install it, cut out rotted plywood, replace, put new cheap tile laminate down, and possibly repaint, kicking the can down the road.

A family member of mine who tends to finance things wanted to put in a finished basement, and said the contractor they got an estimate from does financing, but she didn't know the rate. I feel like it has to be higher than a heloc.

**Retired To Win** · 07-07-2014, 04:07 AM

Pay with cash and be done. Then keep your other money liquid enough to access in case of an emergency. Finally, put all excess money going forward into replacing/establishing an emergency fund.

IMO, being clear of debt -- in this case -- trumps trying to pick up the net difference between borrowing the money on one hand and investing it on the other.

Finally, get ready for NEXT time. What I have done is (1) establish a home repair/improvement fund that gets a monthly allocation, and (2) establish emergency reserves to cover unforeseen expenses. I have detailed both of those moves in separate article posts on my blog.

Good luck!

**johnt78** · 07-11-2014, 09:59 PM

Homeowners planning a home improvement project should carefully consider how they will finance the job. Many payment and financing options exist. The one that suits you best will depend on many factors -- including how much your project will cost, how much money you have on hand, how long the project will last, whether you will be doing other home improvement projects in the future, and how much equity you have in your home.

**snafu** · 07-12-2014, 02:00 PM

Your retirement depends on long term compounding of those funds and is not a suitable instrument for borrowing.

Have you looked into what kind of deal is available on a Line of Credit [LOC] at your bank or main financial institution? I'm guessing the money at hand resulted from selling a vehicle Can you eliminate some spending categories short term to get you past the cash crunch while the work is underway? Cut variable spending to the bone? Sell stuff you no longer need? Is there any possibility of short term, part time work to generate more income?

I hope it all goes well without stress that often accompanies renovations.

How to finance home improvement project?