Depends on the size of the remodel. The last remodel that we did we built into our first loan when we bought the house. But we knew when we bought the house that we were going to do the remodel. Previous to that, for another remodel, we initially got a second which we refi-ed as fast as we could into a new first.

I don't like borrowing on a 401-k, that takes your money out of the market. While you are paying yourself interest, your 401-k money is not growing in the market. And if you're laid off or change jobs, the loan becomes due. This would be my last resort to get money to put into my house.

My first preference is to pay out of pocket, but that's partly because I'm getting on in years (*smile*) and don't see unending years of work that can support loan payments ahead of me any more. We've been in our current house for about 14 years now, and like it the way it is. We have been taking on projects one at a time out of pocket, rather than doing a whole bunch of stuff at one time where we need to take out a loan. This isn't quite as satisfying, but then we don't have giant loan payments, either.

For example, we've done a minor bathroom remodel, refloored 3 rooms (about 700 square feet) with tile, had our plumbing changed from galvanized steel pipes to copper, stuff like that. We need to fix some stuff in our kitchen, need another minor bathroom remodel, and have other miscellaneous things to get done. All of them can wait at this point until we have the money to do each one.

-Roger

My remodel has been more like a facelift -- some more-critical things, like adding insulation and improving ventilation and replacing an old deck, and the rest of it moving around cabinets in the kitchen, new appliances, new flooring and paint, some new light fixtures, etc.

It's been "cash-as-you-go", which is one reason it's taken four years and I'm still not at the end. But given the recent flattening of the housing market here (even in median-to-lower-priced homes like mine), I feel good that I've kept the bling ratio pretty manageable and I don't owe anyone for the work done so far. Not that there's anything wrong with borrowing to get the work done; it's just not my preference.

Hey igloochic. I'm also in Anchorage.

To the OP. We've handled things a couple of different ways. A decade or two ago (read--not middle aged yet), we took out a second mortgage for $20,000 for a kitchen remodel. We could get a second at 8% (a great rate for then.)

When we did an addition 7 years ago, we paid cash. We are pretty good savers. We set a goal and just went for it. It was a third car garage addition with cosmetic exterior work to the rest of the house as well. Total cost around $45,000. For smaller items (bathroom upgrades, flooring, etc.) we just took them in small chunks and paid cash.

This time, we are well into middle age and when we decided to purchase this house, we knew it would take some work. Our other home had a good amount of equity and Key Bank was doing a special on HELOCs. There were several months of zero interest and after a certain date, it was only 2% interest. Not prime plus 2, but just plain old 2%. What a deal.

That basically allowed us to roll the equity from the old home into the new home (price of home plus $100,000 for remodel.) Then when we moved out of the old home and sold it, we were set with a basically low mortgage here and the remodel already paid for. The $100,000 paid for about 85% of what I wanted done. Now, we are just finishing up small jobs one at a time, again just paying cash.

At this time in our life, we wouldn't be comfortable touching retirement money. We'll have this place paid off in just a few years. We have a fixed rate of 4.6% on a 15 year loan, so it really does't make sense to pay it off too early. But we like the idea of going into our sixties with no mortgage and just be done. We are a bit unusual in that we are in our early 50's, yet our youngest is only 7. Who knows what the future will hold and we just find it easier to not have to be dependent on the housing market ups and downs.

Just for the record--we are not the DIY type. So I have to figure in labor for everything and labor is expensive here. If I had really needed to borrow the cost of the remodel, I probably wouldn't have done it at our current age.

Gloria

Wise words about not over-improving. Also wise not to dip into 401-K funds.

Be cautious that you don't get swept up in the media-driven home improvement craze. Sometimes I read posts here where it seems to me people would be better served by just moving, or even doing a teardown. Their "remodeling" is so all-encompassing and they are taking YEARS out of their lives to do it, all the while living in the midst of a mess. (This is supposed to be about living better, not worse! LOL)

We nearly remodeled an entire house. Luckily we were persuaded by a real estate assessor (our next door neighbor) to tear down and start over. Our new house is worth much more than any partly-new/partly-old one would have been AND we didn't have to live in a construction project for years.

Just one other point of view. Some people don't want to move or think they can't afford to do so. Residents of California, with its peculiar tax laws, want to hold on to their low assessments instead of moving.

Gloria, we sound like we have more in common than alaska...I have a 20 month old and am 45 :) Older parents...we have to be slightly nuts to be in this boat huh?

As to the 401K funds...guys, if you're 65, it's not a wise idea...if you're 45 it's just fine if you have a good occupation and a reasonable future working. WORST case scenario is you don't pay yourself back, but you shouldn't borrow from it if you're in an industry that leaves you with a heavy possibility of losing work and having to pay it back tomorrow. It's not for everyone, but it's a smart choice for many. A 10% return (your interest) is a good return for almost any 401K in a long term market. Being afraid to borrow this money FROM YOURSELF is just silly in 80% of cases. If you're 30 and you have a steady job, it's an excellent place to find funds for a remodel. If you're 65 and almost retired...not so good.

igloochic...GREAT advice! Thanks for your insights from a financial perspective.

We live in Seattle, where the cost of living is high, the cost of renovation is high, and all of our homes are worth much more than when we bought them.

We also had one of the larger renovations in here. Almost total gut job. We ended up GC'ing it ourselves, after finding that design/build firm bids were coming in at 250-275K, regular contractor's around 200-250K. By doing it ourselves, we came in around 180K.

I'm a musician, so my schedule and time are very flexible, so I was able to step up and do most of the research and planning. I spent almost 2 years planning and buying things ahead of time, storing them in the garage until needed. My partner is a family/divorce attorney, so he's very well-versed in finances and mortgages, from putting together and taking apart his clients' estates.

We had saved up about 80K from my fees over the last few years, and planned on doing the rest from an equity line at a super low rate. We bought our house in 1994, and it's tripled in valued since then, even before the renovation.

My partner is a very tough negotiator with banks and mortgage companies, and loves hunting down and finding low interest rates. He's not averse to having 3 or 4 bidding against each other for his business (they hate it when he does that, LOL, especially here in the passive-aggressive PNW, but he's from south Jersey so he had a field day with them!).

At the last minute, we bought another small home to live in while we did the renovation (the deal was too good to pass up, and it would become an investment property). That meant that we were stuck using our equity line plus any extra cash we accumulated during the year from both our jobs.

The renovation took over a year, we were able to get back into our house and live in the basement after about 5 months, which meant we could immediately rent the other house and cover that mortgage payment. We did everything possible to avoid dipping into the equity line unless we absolutely had to. When we did, we immediately paid back as much as we could afford the next month.

In the meantime, my partner was able to get a line of credit up to 50K thru the bar association at no interest for a period of time. We would then transfer debt out of the equity line to save on monthly interest.

We set up for ourselves a VERY aggressive pay back schedule, and are fortunate in that we both have the financial means to pay off most of the equity line in the next 2-3 years. This also means that we've cut expenses drastically in our lives...no more eating out, waiting on purchasing new cars (both our cars are 10 years old), no vacations except locally, I've even cut my daily 4 pm Starbuck's latte/pastry item to no more than once a week.

My partner in his clients has many times has seen the result living over one's means. It was important for us to be comfortable, not extravagant, and not be spending the next 20 years paying off our debts into retirement. We're lucky in that we live in an area where we could afford to work the real estate market to achieve what we did, and that both being self employed, one of us could be around for the general contracting at all times.

We also made conscious choices where to best put the money...getting an LG instead of a SZ saved us 4K, shopping at contractor supply houses saved us 50% on materials, putting much of the money into the structure of the house (rewiring, new windows, replumbing, etc) increased the value substantially. Knocking down 3 walls and making a huge great room turned a bland and dated 1978 suburban split level into something that competes with the multi million dollar homes up the hill.

We are using a "renovation mortgage" to finance a $200K renovation/addition. We debated about buying another home that had the kind of space we wanted, but when we looked at what that kind of new space would cost us, adding on to our current (historic) house seemed like a better option for us. Our addition will definitely make our home more marketable, but we plan to stay another 15-20 yrs, so we're not obsessed about what our short-term return will be.

happymary! We found a great deal on a farm (we wanted to raise horses)....it had an amazing barn and already fenced for horses..the house we overlooked...it was a nicely built home and had 1100 unfinished sq. ft that would make it big enough for our family. So, we bought it before selling our current home on a 100% loan...yes, we have two mortgages right now but it's come at a good time while my husband can moonlight and make enough for both until we sell...we have two credit cards that will more than cover our materials list and subs...but ultimately we're putting all the equity from our first home into the second...we're being careful not to overimprove the second home so that our equity will continue to be equity..the extra sq. footage and adding tile flooring/hardwoods/upgraded appliances/countertops (things that actually have hard-fact impact on your appraisal)....we'll clear about $70,000 from the sale of our first home...so we're trying to stick to a 50-60k remodel...at first we figured 35k...and I could have easily finished the sq. footage and kitchen for that, but then we got into redoing all the bathrooms and knocking out a wall..upgrading our carpet choices...etc. it just added up so we're comfortably at 50,000...I'm just amazed at what people will pay a contractor for! Here are some areas where I've really saved.

Replacing 4 complete vanities
...Paid $250 for 2 vanities that retailed for over $1400...they were on sale for $499 each...I asked if he'd sell me 2 for 1..he said yes, then when we checked out (the manager) he also took another 50% off that price and we had a great set and he threw in some mirrors I liked...
..Just today I wanted a furniture style vanity for my most used bathroom...cheapest I could find was $699 at Costco..ugh...went to a furniture store way out in the boondocks that had been recommended..she just happened to have a vanity that sold for $600 but the granite top had cracked...so she sold me the furniture part (hand painted and very nice) for $100...I went to my granite supplier and talked them into cutting out (detailed rim) a piece for $100...I need to find an undermount sink but I'm still c oming out ahead!

I've saved over $10000 already just in seeking out deals on appliances/vanities/tile/carpet/hardwoods...they're out there..you just have to have the time to find them...I'm motivated and rather enjoy all these steals...oh did I mention a great rug retailing over $2500 that I got for $300? Just keep looking! :)
Tara

The worst time to "borrow" retirement money is when you are young. You are giving up too many years of compound interest, and also face greater uncertainty in the future. We have not had a really bad economy since 1982, but don't be deluded, 2008 is an election year. (I am a former financial analyst.)

We were the opposite of houseproud. For many years we rented the ground floor of our town house to a French restaurant for the income and lived in about 1600/1350 gross/net SF above. Now, thank to my wife working harder than any bondslave ever did as a professional, we have taken over the entire 4800 gross SF house and are spending, at NYC prices, far more than we paid for the place in 1984 --and without even keeping track of the cost, to be honest, in any formal way.

We are in late middle age and will be empty nesters in about a month.

Investing in a renovation is both thrilling, and painful. It is wonderful to improve where you spend so many waking hours.

However, make no mistake about it, money spent in a renovation is nearly always consumption, not investment. We have been very fortunate in the management of our economy since 1980, and we have just come off a tremendous real estate boom. These cannot be prudently projected for the next quarter century. Your house, your job, your investments can all run into rough spots --and even at the same time.

Spend your money first for educating your children, then preparing for your retirement, and then, and only then, in upgrading your home.

Frank

Wow, so much great info ...thanks everyone.
If someone tears their house down and builds new, how do you finance that? Our house is not yet paid for..we owe close to $50K on it. We do have a great lot, but wouldn't it cost quite a bit for demolition and take-away? Then, how does financing work on that? We are close to 50 years old and are not going to touch our 401K. We could piece the work out, I suppose, but if we do an addition, how do you do that piecemeal?
I am encouraged and more knowledgeable from this post, though, so I thank you all!

Frank and I have different opinions on the retirement issue..which isn't uncommon :) I was a private banker and investment manger for many years so we both give you a prospective with experience. One works for some, one works for others :)

happymary, you'd be looking at a construction loan for a project like that. Basically it wouldn't be any different than a normal new construction loan, but your demo costs would be higher than someone who was just preping a lot. Before I decided if that was the best idea, I'd want to work with some professionals (architect etc) to decide if total tear out is the way to go, or an addition.

We are in year 6 of a $500k remodel, using very high-end materials, without a single borrowed dollar. We pay as we go and I do all the work myself, and I like it that way. My wife is less patient, and occasionally gets frustrated always living in a partially finished house, but now that we are over the hump and have the main space finished, she's happy. We still have the bathrooms and master suite to go, but have only spent a little over half our budget. She knows we would have spent well over a half-million by now had we contracted everything out.

How you finance is totally dependent on what you want and when you want it. No offense, but I have to take exception with the banker's statement above that you can save up for the remodel, but then "everything will cost more when you start." That implies that borrowing money is free! Borrowing money _costs_ money, and I'd be willing to bet that the interest expense of borrowing would always outweigh any increase in materials cost if you saved up instead.

Finally, more and more I advise people to tear down and start from scratch if you really want a premium home, and I'm a remodeling contractor! You'll get better financing compared to remodeling, and likely save a bunch in money and time. It's also much less stressful, easier on your marriage, and results in less time spent on upkeep and maintenance once it's all done. I'm a big fan of building with structural insulated panels (SIP) as you can build the structure very quickly, protecting everything from the weather, and then take your time with finishing it, as you have the budget to do so.

I just don't like giving my money to banks, but that's me.

I'm with downtowner on borrowing from a 401-k. For one thing, the worst case scenario is not "you just don't pay yourself back". If you don't pay yourself back (like you get laid off, which happens even to people that feel very secure in their jobs, or ) the loan is treated as an early withdrawal from a 401-k. This means that the outstanding balance is added to your income for tax purposes, plus you pay a 10% penalty on that outstanding balance for the early withdrawal.

And, while you are paying yourself back, you are indeed forgoing years of tax-deferred compound growth. Also, you pay back with after-tax dollars, not pre-tax. So your taxable income is not reduced by the loan payments, which is one benefit of paying into a 401-k in the first place.

This is something that you really want to give some thought to, and run some spreadsheets on. I can see doing this for a financial emergency where this is your last resort, but short of that, I can't see it.

-Roger

If I didn't make myself clear I'll try to say it one more time...IT'S AN OPTION FOLKS! NOT A REQUIREMENT! It's one of the options for financing a remodel. The OP asked for options and I shared some. Despite what you may think, that "OPTION" works for some people. Not people who are unsecure in their position, nor those soon to retire. Some folks just don't have the money to pay as they go, and they'd like to remodel. Shoot them for wanting something done now verses later?

Some people also can't DIY or GC their own projects. I'd have loved to, and on a business level, being my own GC would have been easy when I was working, but with a son who is ill I don't know when I'll be forced to fly across the country for care, so it didn't make sense. I didn't DIY for much the same reason. I'm not the only person in the world who wants to do things now. I think what the OP wanted were options. It's nice to share options but if we're going to get into a debate, let's do that elsewhere?

For us, the tax implications of taking from our 401k were significantly better than taking cash from the company as income this year. With a review from a financial adviser we decided this was best for us. It is for many folks, for others, it's not. It's an option to explore.

Matt you're fortunate you never had to "give your money to banks" and I assume that means you keep your savings in a bucket in the backyard (because you wouldn't want to take from banks either right...we're all evil and stuff?) but many people have built amazingly successful businesses by using other people's money, including the banks. The same can be said for homes. There are so many people out there that just can't come up with half a million bucks in a few years and would never even know the joy of home ownership if they didn't "give their money to banks". Banks take risks to "give their money" to these people and in the long run we hope it's a win win for both parties. In the case of a remodel, the same can be said.

Whatever you do OP, do run the numbers and see what makes sense. Many or none of these options may work for you. Frankly if I had my druthers I'd inherit a pile of money from a rich aunt, but unfortunately I didn't have one available, so I had to look to other sources :oP If you have an aunt...be nice to her and wait a few years :o)

I didn't mean to start a major debate. I was just looking for ideas and was curious about how everyone manages these things. A 500K remodel is shocking to me. I am just a regular middle class drone who is hoping to have a better home. I'm encouraged by people who have said they saved up the money for their additions/renovations. It seems like such a large chunk of change to save up. I have been thinking about the idea of tearing our house down and building a new place, but not seriously. more of a daydream. first of all, my dh would drop dead on the spot if he thought I was serious and second I like the wood that our house was built with. I've read in more than one place that houses built with old growth lumber are much sturdier than houses built with newer lumber. I think someone here mentioned that, too.
And finally, we just couldn't afford it. I think now is the time for the research to end and for us to decide what we are going to do and get to it.

igloochic:
Touch a nerve did I? I said I don't _like_ to give my money to banks. Can't say I've ever met anyone who does. And yes, I think a bank is probably about the worst place to keep money right now. I also believe that banks do provide a service that helps a lot of people, but to imply that they do so out of any sense of altruism is ridiculous. It's all about profit, pure and simple.

There seems to be this assumption that financing is always the way to go, and that somehow paying interest doesn't really cost anything. Why wait when you can have everything today?!? But you seldom hear about the crushing debt, and now unprecedented number of foreclosures going on in this country. I don't believe all bankers are evil, but if you want me to even for a second believe they are anything more than blatant capitalists, I'd have to see a lot more action taken to address the present foreclosure rate, as well as the unconscionable marketing of adjustable rate mortgages, etc.

Ok one reply then I'm done....OP :) I'm glad you received some information from the posts here...probably from all of them but the last couple heh heh

Matt...Sure you touched a nerve. I absolutely hate the rediculous assumption that banks are the evil and everyone else is good. Of course banks are in the business to make money. Ummm crazy thought here...but I'd bet you are too? You didn't come up with half a million bucks by building for free now did you? And frankly, I would be the first to stand up and defend you and say "good for you" I believe that you have the right to make money, and so do banks. If they didn't make money they couldn't give it away. That's kind of how our economy works.

To say that there are absolutely no altrustic thoughts involved though is an unfair statement. There is a regulation called the Community Reinvestment Act which requires that banks invest in low and moderate income people and communities. It forces banks to do business in all ways in all communities they wish to do business in, verses allowing them to rob a community of their funds (by accepting deposits) but not give back in the form of lending. To do so causes devistation to a community, and this is why the act was created by congress in the 70's.

Now banks can receive ratings from the horrible to the Outstanding level. This is the only bank rating that the public can actually take a look at after an examination is completed. You can choose to do business with a bank who does a great job, or banks that do a terrible job with the regulation, or with the majority of banks that do a "Satisfactory" job. 90% of banks are in that Satisfactory category, so to conduct our business at that level is fine and dandy and meets the regulation.

But some banks don't find that doing "just enough" is enough for them. Some 2% of banks in the natiion have a rating of Outstanding. These banks have absolutely no NEED to be OUtstanding, they choose to because they have a desire to give back to the communities that have made them what they are. This is altruism plain and simple, they don't have to do it but they do.

When I worked, I taught banks how to get to this level, and managed the program for a bank that was at this level. I was paid to do nothing more than find ways to give back...how many people are paid for that in your business Matt? Sure banks make money...but they also put billions of dollars into the community to make it stronger as well. Not everyone has what you or I have Matt, and there are people out there who own banks who want to see more people become like you and me, and yes, evil drones that they are, they make money too...but if they didn't they wouldn't have anything to give away now would they?

Banks are also regulated by HMDA (Home Mortgage Disclosure Act). A HMDA exam is not available to the public, but HMDA ratings are. If the public would choose to NOT do business with lenders (not just banks but any lender who lends for home purchase and refinance purposes) who have terrible ratings, the world would be a much better place. Do you look to your bank's rating before doing business with them? I'd guess probably not?

Banks, traditional brick and morter banks, are concerned about the issue of predatory lending (which is the main reason behind those foreclosure rates). Most don't do it (and adjustable mortgages are not always predatory). But the ones that do could be put out of business if people would pay attention to HMDA ratings, and wouldn't be greedy.

I mentioned that someone shouldn't borrow above 80% and on occasion 90% of their home's value for anything. And yet people want to borrow 100% or more of the value of their home quite often. These folks fall prey to the predatory lenders very quickly. Why? Because they had to go to Cancun that year, or wanted a third bedroom for their 4 person family or the laminate wasn't in good shape and they wanted hand made tile. That's nuts and it's greedy and stupid. You don't see many predatory lenders helping out folks who have cancer and need the funds to get treatment...they prefer the "must have it now" folks because they don't worry about the future. That's why you find people like me, evil bankers, who lecture over and over and over again not to borrow like that.

The world goes around because of people like you and me Matt. Banks and contractors...evil and stupid and all the other things we're called, but what we really are is people in business to make money, BOTH of us are :) Until you know better, don't paint all bankers with the same brush. It would be the same if I compared you to the lazy sob who built our last addition. If you were anything like him, you wouldn't be making money :) You're probably a great builder (I read concern for quality in your posts). I won't paint you with his brush, but you owe me and other bankers the same curtesy.

::Jumping off of soap box::

igloochic:
Just to set the record straight, I never said banks or bankers are evil, or stupid. You brought both those terms up. I think you are probably a good person and a good local banker, which is probably why you got so defensive from my perceived criticism of the industry as a whole. My only point was that borrowing is not cheap, and banks have no incentive to urge you not to borrow. Interest expense is a very high part of most mortgages, but you almost never hear it discussed. The OP asked how people pay for things, and you implied that paying now with credit would actually save money compared to saving up and paying in the future, and I just do not think that is true.

But, if you are trying to win me over with the fact that a good 2 percent of banks go above and beyond the call of duty, well let's just say that I am underwhelmed. I have been a Habitat for Humanity volunteer for more than 20 years, putting in probably 400-500 hours per year helping people out. I see lots of donated materials and services from local businesses, but I have yet to hear of any bank offering free or discounted financing for any HfH project. Have you?

I do know the history of the banking industry quite well, thank you, especially the large banking conglomerates, and I see them for exactly what they are: a for-profit business that does not make money through altruism, just like being a contractor. Some are good, some aren't. But when a bank is not good (i.e., relies on predatory lending practices), people lose their homes, and not enough is being done about that, in my opinion.

We'll agree to disagree on what I was trying to say when I suggested borrowing money was an option verses waiting. For some folks, waiting means never...they have to finance over time and given that, options were presented. Of course it costs to borrow money, but waiting half a year cost me several hundred dollars on my fridge..stuff costs more :) Prices rise, etc. Anyhoo, just to answer a final question...

I worked for a national bank and most of the banks I taught were national as well. I'm quite familiar with their donations history and their CRA activity (reduced or no interest financing for LMI projects) and I can say that HfH actually receives the majority of it's financing at significantly reduced rates if not no interest loans. Banks also invest in the tax credits used to build the homes built by HfH. Most of the "conglomerates" you're probably thinking of do have significant lending to local HfH chapters and very few are at market rates. In addition, most banks service the HfH loans at no cost to the borrower or HfH which may not seem like much to you, but is a significant reduction in fee income. Those loans are often a pain in the kiester due to the repayment structure and the borrowers aren't typically terribly financially sophisticated. Banks don't whine about this :) They like to help borrowers like this out. But it is a significant amount of money spread across the country.

The conglomerates I worked at also donated significant man hours to HfH as well. Here we built 3 homes on the bank's dime, both for man hours and materials. The bank I last worked at always provided workers and money to HfH directly to cover costs of building homes, normally in the tens of thousands per home per community.

I'm in full agreement with you that predatory lending needs to stop. BUT!!! It's not banks (not the major guys) that are behind most of that lending. It's mortgage lenders and their investors. They don't have to worry about a bad HMDA rating, so they do as they choose when it comes to lending. Unfortunately a bad HMDA rating won't put these guys out of business. This is why banks are spending thousands of dollars in every community (that adds up to millions) to educate buyers so that they don't fall for predatory lending schemes. They still do, but we try.

I also fully believe that banks who do have spin off mortgage companies formed specifically for predatory lending practices should be taken to task for this. The OCC has proposed ways to deal with this, and the FDIC and FR are on board...there are just a few more steps to take, but hopefully soon some of these lenders will be put to shame monitarily for what they're doing...and when that happens, they'll stop (hopefully).

My goodness - I think I've learned enough about banking! Let's talk about a frameless glass shower, beadboard, marble floors and a clawfoot tub. All the things I would like in my masterbath. I'm just hoping my contractor comes back with a decent estimate.

Heh heh mother of 3...let's see if I can give you a figure...ummm my shower (Frameless glass 3/8 inch) OUCH $6800. OUCH! Marble floors...ummm $10 sq ft :) and I couldn't find a clawfoot tub under $2000 but of course I loved the stuff that cost more :oP (If I were in the lower 48 I think I'd rehab one from an antique store frankly).

That sounds like a pretty bathroom :) I hope it works out for you! If your contractor gives you a bad estimate...try another one :) It's AMAZING how different the costs can be!

Happymary - I drifted over here from Home Dec, where I usually hang out. Like you, I'm amazed at the amount of money people put into renovation. I live in San Francisco, with pretty much the highest cost of living around (though wages are okay, but not to match the house prices.)

I hate owing money - the only loan dh and I took out was for our first house. We were able to pay that off in less than 10 years, then prettied it up a little and sold, bought a MUCH nicer house with our profits and savings. It was sure a lot less trouble than tearing down or doing a total remodel. Just wondering if in your situation it would make more sense to move??

I have thought about moving. Here in San Antonio, the housing prices are still sane, but I am really specific about the neighborhood I want to live in. I have resigned myself to staying where we are and improving and possible adding on. I know it wouldn't cost as much to do an addition here as it would in most other parts of the country, and we can do a lot of it ourselves (finishing work, anyway) but the disruption along with the cost is enough to put me off. I think we could comfortbly come up with about $25K but I want to know right from the beginning what we can do with that and what to expect. I don't want to get halfway through the remodel and find out we can't finish it or run out of steam doing our end of the work. I know it takes research, research, research, so I should start that. its free to plan and price things.

A bank robber was once asked why he robbed banks. He famously replied "Because, that's where the money is!"

Not that I'm suggesting anything...

happymary, i just found this thread and thought i would throw in my 2 cents.

we are in pretty similar situation. my wife only works part time in the evenings to take care of our children, so our overall income is pretty low.

we bought our house for next to nothing, so that has helped out ALOT. we paid $9,500 4 years ago. it was a tax forclosure.

(all of our renovations have been a complete gut down to the studs, new electric, insulation, plumbing, etc)

we first started our renovations last year, when we had saved some money from our wedding to remodel our bathroom. we do 90% of the work ourselves, so it makes it alot less expensive.

we were incredibly lucky to get a grant from our town, as our house is one of the oldest. they gave us 20k to do energy improvments including windows and doors, as well as a new roof, new electric service and a few other odds and ends. we would never be where we are without that.

by this point we owed nothing on our house, but had increased the value to 50k. we took out a home equity loan for 20k(total loan for 40 to pay off some debts) for the next set of renovations,which include the dining room, laundry room, master bedroom and nursery, ALOT of hvac work, new 20x14 deck on the read, and rebuilding the front porch, along with vinyl siding all around the house.

this year we took our income tax return and did oour ultimate budget kitchen, being a complete gut, with all new floors, cabinets, sink, DW, etc for $6500!

this summer we plan to renovate the 2 smaller bedrooms, using our home depot credit card.

as of now, our house was appraised at 85k. we hope to sell it in 4 more years (after our 5 year obligation to the town because of the grant) for around 100k. not including the grant, we will have around 30k into it, but over a long period of time.

Radioguy,

thanks so much for your story. I love hearing that great renovations CAN be done with not-so-much money and sweat equity. That price for a complete kitchen redo sounds very reasonable. Could you give more details about that? our kitchen needs redoing DESPERATLY. I figured I would have to wait for the addition I'm planning, but if I could make some cosmetic changes in the meantime it would help.

happy mary,

the theme for our kitchen remodel was budget and simple.

our cabinets are mills pride from home depot. we saved alot by using them. we spend about 2500 on them. we bought pretty much bottom of the line countertop from hd, but found a design that stood out so it doesnt look "cheap".

we saved alot of money by making toe kicks ourselves out of pine and staining them to match the cabs. all the electrical was done by me, and it was my first big electrical job so i did alot of studying up. i cut cost on the wiring by going in with 2 other people on a 1000' roll of wire.

our flooring is vinyl, and we found a return at the flooring place and got like a 30% discount on it.

we saved on paint by having the primer tinted so we only used 1 gal primer, and 1 gal paint instead of 2 gal paint.

the DW was given to us by my dad... it was only a year old. we kept all our appliances, as they werent that old.

by doing the majority of the work ourselves, we saved a bunch. i'll try and snap some pictures later today of the cabs and stuff.

Happymary45, in Texas we have a couple of common options, the first being a home improvement loan with your bank, a home equity line of credit or an outright refinance. A lot of this depends on the amount of equity you have in your home and your comfort level with either two payments or an increased single payment. Two other factors enter the picture the first of which involves determining what you want to do and getting an acturate picture of the cost from posible general contractors. Secondly, determine what part of the work, if any, with which you feel comfortable. With this information you will be able to gauge your additional payment(s). Also, if you change the foot print of your house by additions, it may increase your property tax and it most certainly will increase your property insurance as it will add value to the house. My knowledge of these factors have to do with personal experience as well as being electrical contractors in Dallas working with GCs on large remodels

When we were house hunting we had two different budgets for a completely renovated house and one at $100K less for one that would need majour renos eventually. The one we finally bought was the latter one. So the mortgage was manageable and has been paid of within the first 9 years of living here. During this time we only did minor renos that couldn't be postponed and took advantage of government grants for energy efficiency measures. It's only now that we tackle everything else that's needed. The interest we negotiated on the home equity line of credit for the renos is lower than the interest we earn on our investments. So it made more sense to go into short-term debt rather than dig into our savings.

I have been watching this one for a while, but cannot resist the obvious answer of Bureau of Engraving and Printing in either Washington, DC or Fort Worth, Texas.
Those are the two plants now producing currency.

Sounds like building sand castles. Do we really enjoy your new kitchen when wefre deeply in dept? I defiantly will not. I know a guy who bought a used Mercedes from my friend. His check was bunched when it was deposited. They are still friends, but every time I see him driving his Mercedes (w/ his sob appeal), I think of the story.

Wow. I'm sitting here as the framers are boarding off our sunroom to begin our 450K+ remodel in Kirkland, east of Seattle. We got a construction loan, as ours is a major remodel. Both we and the bank agreed that we could not buy what we will have with the cost of the remodel plus the original price of the house. It is a lot to pay for a home, but we're close to all of our family, great schools fantastic neighbors, a phenomenal sunset view of Lake Washington, and a really fun town to boot. In the end, it's what we want and can do right now. There will ALWAYS be more expensive homes--we're surrounded by multi-million dollar houses--but that's not what we're after we're just trying to make a comfy place to raise our family. Cheers, S

Bank jobs.
Willie Sutton

I have been lucky, or unlucky if you look at it another way, to use money I inherited to remodel my house/farm.

Found a rund down horse farm, 20 acres, 10 years ago. Got it for a steal, so says the local RE Broker. Turned the 600 sq ft "garage" (originally the hunting cabin) into a family room. My parents put on a 600 sq ft in-law setup on the other end of the house to "balance" the house, so my Mom said, for when they visit. And I am just finishing a tear-out remodel and expansion of the kitchen and remodel of 2 bathrooms.

I've added 1200 sq feet to what was 1300 sq ft, and updated most things. Costs in Western NY for all this work have been $160k, more than I paid for the house originally.

It is currently over-improved, but I plan on living here for another 30 - 40 years. And fixed up properties like mine with acreage are very desirable. I'm 30 minutes from downtown Buffalo, and families are moving out of the city and crowded suburbs to properties like mine.

Another banker here, I have been a mortagge banker for 20+ years .. worked for a Mortgage Broker for 17 years and 2 banks since. Love working for the local community bank where I finally ended up. We are very involved in CRA programs and I specialize in Reverse Mortagges for Seniors.

Wise words from my father: If you can't pay for it, you can't afford it. It's a tough lesson, but a good one, IMO.

I have saved for years and now am in a position to extensively remodel. My home is paid off, even. I am a single woman that works long hours and has dogs that need care. After saving all these years, the time has given me several good things: I've had much time to consider the various materials and styles and designs of rooms and countertops and the like; I've had much time to live in the house and know what most bothers me and what I would most like to do; I've lived in the house long enough to see that if I want a WHOLE lot done, maybe I should consider moving to a house that is more like my dream home (but my location is awesome, and I could never afford to buy my dream home in my current area).

There are only a few times to borrow money, IMO: a necessity item that few can rarely save for ahead of time (a home, a car); medical and other types of emergencies. It's not a good idea to go into debt for a luxury expense, which is what a remodel is. And definitely do not borrow from your retirement funds for an unnecessary expense.

Funny thing is...now that I've saved the money, I don't want to spend all that money on a remodel. I'm thinking I may want to hang onto it for a better retirement, or maybe a facelift? (not that I need it! Ha.) So I'll compromise and do a few nice things, but stop short of an expensive remodel. And I will have to do one room at a time, because I work and will have to drive home at lunch and check on things...I just don't have the time to check on major work being done by contractors and subcontractors. And now that I have dogs, I don't want them to be driven crazy by loud noises all day.

So my answer is....I scrimped and saved and worked my hiney off BEFORE incurring the expense. I beg you not to go into debt for an unnecessary expense. You never know when you'll get hit with a big emergency, and your world will cave in around you. You are middle aged like I am. You have to consider these things. Get that jacuzzi tub, that new countertop, that new SS fridge with the bottom freezer, new flooring. Bot don't overhaul your house and go into debt over it. Just my 2 cents worth of advice. (How much house do you REALLY need to be happy? I have chosen what I would like MOST, and I'm going for that, and accepting that I will not have the other things. Can't have everything. I may have a couple of rooms enlarged somewhat; I'm getting new countertops and new fridge; 2 baths desperately need redoing, so I may get that jacuzzi I've been dreaming of for years; and then some painting, new curtains, things like that.) I wish I could get a huge remodel, but then, I don't really want to live with that hubub for over a year, and I certainly don't want to move out while it's being done (what my neighbors did). I have a cute little cottage, so I guess I'll just zap it up but accept that it will remain a cute little cottage.

Where does the money come from? That's a question I wake up in the middle of the night in a cold sweat and ask myself on a very regular basis. WHERE?

We are completing what was intended to be a $350,000 addition and remodel and our current contract price is $575,000. We've sold stock options, taken a home equity line of credit and will be re-financing at the end of it.

No, we didn't plan on the real estate market plumetting. No, we didn't plan on our original house being made with the same structural integrity as a sparrow's nest.

In the end, I look at it this way. We're going to be living in our retirement fund and enjoying it every day. No, it won't appreciate as fast as our investments were (WERE being the operative word), but it certainly gives us a better feeling than those statements did. I hope we can afford this mortgage that we weren't planning for and if we someday do regret this decision, I know we can sell for more than we have into it, so that's some comfort.

Excellent question. Our plan was much like lmhall's plan. Unfortunately, our remodel is now on hold because the market plummeted, and we were not able to turn around and sell our old house in time. At the same time, the value of both homes has dropped, so we no longer have 20 percent equity in either house. We've rented our old house, but the rent doesn't cover the mortgage. We are hoping that we'll be able to continue renting the house for one more year so that when we sell it at a loss, the loss will be tax deductible as a business loss. In the meantime, our savings plan for the remodel has evaoprated, since the money we had planned to save each month is going toward payments on the house we thought we would have sold by now. Since we're not able to put money aside each month as we have in the past, we're not comfortable at this time borrowing from my 401-K (serious YIKES if I had to pay all that back immediately on top of two mortgages). Here's hoping that this real estate market starts recovering soon so that we can get back to fixing up our 1964 house.

BTW-- for those who keep advocating a full tear down vs. remodel, in our area we see many more remodels than tear downs because a tear down and rebuild counts as a new house, and is reappraised for property tax purposes as a new home, whereas a remodeled home retains its original purchase price for tax purposes. Be aware that you could get hit with some hefty supplemental property taxes depending on the laws in your area!

I do my own.

Michael

I"m glad this post became active again. I'm still trying to reconcil what I want to do for our house to what we can really afford to do. I'd like to hear from the folks who responded last year to see how many would still refinance or do a line of credit. I thought about both. I still think about both. Our mortgage is so manageable, I think we could do it, but I def don't want to get in over our head. Also, brushworks, I WISH we could do it all ourselves. But I have serious doubts about being able to and being able to finish.

Happymary -- I totally here you. We're teetering at "in over our heads" and I sorely miss the days just one year ago when we had a totally manageable mortgage. Had I to do this again, we would have stayed put and learned to love the house we were in, warts and all.

I would take a look at your budget, see how much you can afford (assuming you take out a LOC) and then look at the renovations you can do for that amount.
Think about ways to live in a smaller space- better storage, nicer finishes. I have found it more affordable and more satisfying to have a really nice 8x8 masterbath, than a so so 10x20 master bath.
If you want a new kitchen- think about IKEA cabinets. They are very nice and very affordable. We just redid our kitchen cabinets for around $2500 and I am very pleased. Check out ebay for lights, cab hardware, faucets. I was lucky and found awesome door hardware for $1 a pc.
We recenly moved from a new 3600 sq foot house to a 1964 1500 sq foot house. i must say, I don't miss the space and I feel more "green" living in a smaller space and using less energy. In addition, our mortgage is much smaller, which gives me the option of working PT and enjoying life! We have spent about $30K on remodels, some DIY, some contracted out (no GC involved) For that we got a new kitchen, 2 new baths, new light fixtures, drywall work, including covering all the old popcorn ceilings, new mouldings throughout, new paint. We are now looking for interior doors at Habitat- have found some really cool, heavy old doors for cheap.
It can be done, with research and bargain hunting.
Good luck!

Dogridge,

That sounds so much like our plan. And we haunt habitat, too, but we don't have a firm plan in place, so we don't "stow" stuff for the future. I'm in the process of trying to create a plan of action and figure out what to tackle first, etc. One thing I'm hesitant about is what we can not do ourselves and finding someone who will do things piecemeal with materials we will provide. What part of the country are you in? we went to habitat just this past weekend looking for interior doors because sometime in the past they took out the solid wood panel doors and "upgraded" to crappy hollow-core doors. Oh where can those old doors be? It breaks my heart to think of those doors sitting in a landfill...

Happymary45, what I have learned from my recent remodel (note: no walls moved) is that you can get a great look from mid-range materials, laminate instead of solid surface or granite, faux paint your cabinets rather than replace, vinyl rather than tile, etc. I do not have the time to be a great bargain hunter like some on this thread. On the home building forum my mind is repeatedly blown by what people are putting into materials and finishes, which they love and I think is gross!

Also, you can save serious bucks by learning to do some things yourself and painting is the easiest to learn to do well. I had never held a paintbrush and I am now a whiz, oil, latex baseboards, taping, freehand you name it. Don't have a spray rig though :)

I also hire the husbands of women at my office who are professional plumbers, electricians, etc to do "side work", often on convenient weekends.

Also if you are using contractors or a GC and you say up front that this will be a 'nice laminate and vinyl job' I think you get them on your page.

I am in the Raleigh NC area. We hired out a lot of stuff because we were on a tight time schedule. I found most trade people willing to work with my materials.
We hired out all the new electrical wiring, except hanging the fixtures. Our plumber redid the drain pipes for almost the entire house and put in the new faucets, new toilets, baths, etc. We hired a tile contractor to do the baths, but did our own small backsplash. I also hired out drywall and painting. We basically did the assembly and install of the cabinets, hung all the light fixtures, replaced many of the doors- still some to go and replaced and painted most of the moldings (though we hired a carpenter to do some of it).

Gee, now that I look back, we really hired out most all of the project. I guess I am getting dragged down by all of the little details that are still to be finished up- the last 10% that takes 90% of the time.

Anyway, most of the trades we got through references and a friend who is a real estate agent hooked us up with the painters and drywall guys. No one questioned using our materials, in fact the plumber and carpenter requested that I supply the materials. The plumber and electrician were smaller companies or were moonlighting.

Overall we're very pleased with the results and I feel proud that I did most of it myself (the contracting that is ;-))

I know what you mean about the doors- we have all plain hollow core. There are some beauties at Habitat, but you do have to dig. I just took the paint off an old heavy door and found wonderful cherry veneer underneath- amazing!

I just saw an episode of This Old HOuse that featured a place in Gonzales Tx that specializes in old doors and hardware. Probably not too far from you.

Happymary: I myself am frequently astonished at the incredible amounts of $$ people spend on remodeling. Truthfully, when I see some of the posted pics, many of the expensive new kitchens, baths, etc. look much alike, not much individuality evident. Anyway, I am in the central TX area (N of Austin). We are in the process of remodeling an old TX farmhouse while living in another house that I am also trying to update in preparation for selling when the other house is ready to move-in. DH and I are both "of an age", and he will be eligible to retire in 4 years if he wants and he is adamant about not having a mortgage or similar payment post-retirement. Perfectly understandable. I teach part-time so we live modestly and frugally. We bought the TX farmhouse for cash (due, in part, to the sale of DH bachelor house) plus savings. We are financing our remodel with our savings, too. Thought about a construction loan, but are trying to do the pay-as-you-go thing. We are acting as our own GC (another cost savings) and the crew doing the framing are also doing the metal roof on both the new part and existing house. DH will do the electrical himself, as he is skilled in that area although we probably will hire an electrician to check his work at the end. After the framing, roofing, and electrical are done, we will re-evaluate our finances to see the next step, likely plumbing which could get complicated as we are doing a rainwater collection system that will be pumped back to the house for use in the new bathroom. We don't want to deplete our savings entirely for our remodel as everyone needs an emergency fund for those unexpected expenses (car, medical, hail damage, etc.) Much work on the existing house needs to be done, but we've prioritized our primary objectives (that is, what absolutely needs to be done before we can move in), then our secondary objectives (sadly, the awful, but functional, kitchen fits into the second category). Absolutely, do not bankrupt yourself to do a remodel. Sometimes there are creative and innovative ways to make your existing home more pleasant and livable without spending a great deal of money. I reiterate what many on this forum have said; be creative and research, research, research. By the way, the place in Gonzalez is called Discovery Antiques and they are quite pricey (cater to the Yuppies in Houston and Austin, I think). A better bet is the Habitat for Humanity Re-Stores. I've been to the one in Austin on Comal St. and surely there must be one (or more) in the San Antonio area. They often have the old longleaf pine flooring, solid wood doors, and other materials that have been removed from the tear-downs of old houses in the area. Also, salvage yards, if visited frequently, can provide a lot of materials. I recently bought 10 boxes of white Daltile subway tiles for $7/box (each box covered 10 sq. ft.) at a salvage yard. I redid the bath surround in my current house with those. IMO, especially in light of today's housing market, no remodel is worth going into debt for.

Rosieo,

we are in San Antonio and I have heard of the gonzales place. I suspected they were probably pricey. We do check out habitat regularly, but I don't know of any of the salvage yards you are refering to. I'd love to discover more places to check out.

Because we both work monday-friday 7 a.m.-at least 5 p.m. about, we aren't able to go to habitat to check out the stuff every morning. I suspect that is when the real treasures are available.

I'm very heartened to hear from others who are determined to improve their property without spening 100s of thousands of dollars!

Mary: I googled San Antonio salvage but most were auto parts junkyards. I did find a place called Architectural Antiques of San Antonio (http://sa-antiques.com/), but from the looks of their website they are probably expensive. They do have old, solid wood doors, though, that they've stripped and look like they are ready for staining or painting. If you are nearby, it wouldn't hurt to check them out. Here's another possibility: AAA Freight Salvage Sales, 1111 S Presa St., San Antonio, TX 78210, (210) 533-8611. Freight salvage yards are where you can find absolutely anything. I also find out about lots of sources by asking people who are also remodeling, or contractors, or any others I can think of. Also try cruising Craigslist, eBay, etc. On eBay, you can limit your searches to just those within 50 miles of your zipcode if you are searching for a large, heavy item that you would rather pick up locally then pay shipping. Don't ignore places like Costco, either. I just ordered a free-standing, acrylic clawfoot slipper-style bathtub from them (online) that also included the tub faucet, hand-held shower, and plumbing supply lines from the floor. Cost: about $1000 including free shipping. I wanted the look of an old clawfoot soaker tub but, due to the pier and beam construction of our old farmhouse, it had to be an acrylic tub because of the weight. So, keep your eyes and ears open and think outside the box (big box, that is).

Both of my parents are Great Depression kids, so I've scrimped and saved for years to have all the money in the bank before even thinking about starting a major renovation.

I have an aversion to spending money. Nevertheless I am in the midst of a 260K remodel. We thought we were starting in early 2007. Re-fi'ed and have been paying the "new" mortgage (and house insurance increase) w/o any changes.

It used to be an old adage that you always make your mortgage. And we have done so for 1 1/2 years. But now that the house demo, foundation and framing has started I still wake up at night wondering when the bill is coming due. We also cashed in our outstanding HELOC b/c I heard/know many are being rescinded due to loss of equity in the home.

I was really confused about this too. Ppl would say they took out the equity on their home and it sounds "free" but really you just qualify and pay for a larger mortgage.

well i hear money comes from money trees...sadly they do not grow in our climate zone...see garden forums for more details
i also have been following this thread with interest since last year (!) when we tried and failed to get an addition plan that would remain within our budget. (which was 80K). one person told us 60-80 K but it ended up at 110K. we really liked this person's work and wanted to do it, had been saving for three years, etc. in the end we decided NOT to add on and also not to move. instead, we are adding a deck DIY. we'll have our family room, but only in the summer. after a period of mourning, i have accepted the loss of the addition dream. it is nice to know that our costs are going down, rather than up, as we pay off the original mortgage. it's a great feeling, not exhilarating like a new room on your house, but great just the same. also being able to handle the debt on a single salary is anxiety reducing.
i know this sounds ridiculous but i have actually focused on removing anything i don't LOVE from the house. less stuff means a bigger looking small house. it started painfully, but is getting to be more fun. just my thoughts, if they help. good luck! kren