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October 1, 2007
Financing home improvements
Would you finance (via home equity loan) renovation costs for your home if you had the $ to spend on it? I'm trying to understand why many people finance their home improvements. Is it b/c they don't have the cash handy or is it b/c the assumption is that your $ is better used invested in another vehicle.
Any thoughts would be appreciated.
Comments
When improvements to the house make the house more valuable than the amount of money and interest owed on the home improvement loan, it's like paying cash isn't it?
Posted by: guest at October 1, 2007 9:37 PM
There are also very advantagous tax benefits from Refi and Home Equity Loans.
Posted by: newsouthsloper at October 1, 2007 10:18 PM
you can get tax deductions on interest on mortgages up to i think 1mm & home eq up to 100 grand.
Posted by: going4broke at October 2, 2007 6:29 AM
Its about leverage. The return on the cash you invest is higher if you use some borrowed money. Of course the loss, as a percentage, is magnified if you put money in you can't recover.
Posted by: guest at October 2, 2007 7:59 AM
If you have the cash available, ask yourself how much you can get by investing it and compare that to how much it will cost you to borrow, including the tax deduction you can take on mortgage interest. If you can earn more on your money than it will cost to borrow, you come out ahead by borrowing. If not, you come out ahead by spending your cash.
Generally, most people take out HELOCs and the like because they don't have the $20K or whatever sitting around but they can afford an extra $300/$400 a month in payments. People think the tax deduction on mortgage interest is this great thing, but in the end, when you take out a loan you are paying a fee to use someone else's money, tax deduction or no.
Posted by: guest at October 2, 2007 10:36 AM
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