- quote -

borrowed? If you can come up with a 5 year repayment plan, this is
less of an issue. If the line of credit were used over longer
periods, then the interest rate risk increases and the fixed rate loan
makes more sense.

The advantage of a HELOC is that it still exists when it is paid off.
If room 1 costs 50k to remodel, HELOC that 50k. Then pay it off in a
short amount of time. Then take 30k out of HELOC for next room
(improvement). Pay that off. Then take out 70k to do third room, for
example.

HELOC might be worth 150k or so, but there is nothing requiring you to
tap the whole 150k for credit at once. Only take out what you need to
spend now- that will also reduce the risk of rising interest rates,
and help you pay off the line of credit sooner.

On Jan 10, 3:25*pm, liuhen...[at]gmail.com wrote:
- quote -

You have to run all the numbers, but at the end of the day, you have
to feel comfortable about it. If you want to continue to own your
house outright, wait until you can pay cash. Any loan with the house
as collateral means someone else has a claim on that property.

Don <dwzimm[at]telus.net> writes:

- quote -

Yes.

--
Plain Bread alone for e-mail, thanks. The rest gets trashed.
No HTML in E-Mail! -- http://www.expita.com/nomime.html
Are you posting responses that are easy for others to follow?
http://www.greenend.org.uk/rjk/2000/06/14/quoting

liuhengyi[at]gmail.com wrote:

- quote -

You should shop around for the best deal.
For the sum you need, the closing costs represent a small percent of the
total cost. I offered yesterday that I saw a 15yr fixed at 5.5% with no
points but $2300 in closing costs. That's better than the no cost
alternatives with rates approaching 7%.
Keep in mind, unexpected additional costs may creep in, beeter to have
the money lined up in advance, you can always may a pre-paypayment once
the construction is over.
JOE
www.blog.joetaxpayer.com

On Jan 11, 4:13 pm, Charlie K <Cha...[at]excite.com> wrote:
- quote -

Thanks for all the suggestions. The cost for the remodeling (some
expansion) may be around 150k. We do have savings for this. I'm
thinking to take some from savings and some from home equity. HELOC
seems an easy option but risk of rising interest. So I'm thinking
about the conventional mortgage, but closing cost and paper work may
be an issue too. I guess it all depends on the loan market in the
future. I don't even know when the work can start, depends on when the
city can approve it .


======================================= MODERATOR'S COMMENT:
Please trim the post to which you are responding. "Trim" means that except for a FEW lines to add context, the previous post is deleted.

On 2008-01-11 16:13:08 -0800, Charlie K <Chas_K[at]excite.com> said:

- quote -

I understand that whether or not interest on a loan is tax deductible
depends on the purpose for which the money is borrowed. But for a given
purpose, the source of the funds does not matter, does it? Wouldn't the
interest paid on a mortgage, a home equity loan, or a line of credit
all have the same tax implications provided the borrowed money was
spent upgrading real estate?

On Jan 11, 12:44*pm, Don <dwz...[at]telus.net> wrote:
- quote -

There are tax considerations. To be fully deductible interest, the
proceeds have to be used for a home acquisition or improvements to the
home. If you refinance, any tax deduction for interest expense on a
mortgage amount not directly linked to improvements will be limited to
the interest on $100,000 in principle.

jIM wrote:
- quote -

My HELOC (zero balance right now) shows an interest rate of 6.74%, I'm
sure some are available for less, maybe 6.25%.

Much of the decision would depend on the OP's loan amount and intent to
pay back.
I see a no point 15yr fixed at 5.5%, $2300 in closing fees.
Same bank, 10 year fixed loan, no point, no closing, 7.09%

The HELOC risk of rising rates is there, although may not be an issue
for the OP depending on total balance and timeframe. Some math is in order.
JOE
www.blog.joetaxpayer.com

On Jan 10, 3:25*pm, liuhen...[at]gmail.com wrote:
- quote -

Isn't this a good case for a HELOC? The OP could open a HELOC, which
allows OP to have a credit card or something similar which is
a) tied to equity in house
b) has a variable rate based on Fed and credit score
c) has a low maintainance fee
d) able to paid off, but remain open for future needs.

Thoughts?

On 2008-01-10 12:25:54 -0800, liuhengyi[at]gmail.com said:

- quote -

You might consider a "line of credit" instead of a mortgage or a home
equity loan. I have used these on rental properties, and they have
worked very well. If you have good credit, you can usually get one from
a bank at a lower rate than a mortgage or home equity loan, sometimes
below prime They are more flexible and can be paid down or paid off at
any time without the paper work, possible legal fees, etc. that is
needed for getting a mortgage and for paying it off when you no longer
need it.

On Fri, 11 Jan 2008 07:47:24 -0600, "HW \"Skip\" Weldon"
<skip5700removethis[at]hotmail.com> wrote:

- quote -


My point is that it doesn't matter if you are working or retired, own
your home outright or not. What matters is if you can afford the
mortgage. Do you have enough coming in?
Thumper

The fact that you owe a mere $5k on your house is strong
evidence to me that you can handle a reasonably-sized new
mortgage. You are to be congratulated.

The Federal Reserve meets again on Jan. 29 or 30th, and talk
is mighty strong there will be another cut to the Fed's
"benchmark interest rate." I expect it's likely this will
affect 15 and 30-year mortgage interest rates in your favor.
Google and you might find more on this. But it's been a
funny time for interest rates, with what's known as the
"bond yield curve" being partially inverted (and this being
an anomaly, so no guarantees that the rates will improve
still more after Jan. 30.

I would follow Skip's advice to figure how much mortgage I
could afford, then run numbers, evaluate possible lenders,
etc. until Jan. 31 or so. Finally, watch what the Fed does,
and go from there. An interest rate of 5% on a fixed
mortgage is certainly attractive, given that stocks have
returned quite a bit more historically over 15 year periods.
This assumes one does not mind not owning one's house
outright.

It's possible you will get a good deal on remodeling
contractors in general, as well, since a lot of developers
have been slowed down by the oversupply of housing.

On Fri, 11 Jan 2008 07:08:05 -0600, Thumper <jaylsmith[at]comcast.netwrote:

- quote -

Devil's advocate here: The fact that he can make the mortgage payments
does not necessarily mean he can AFFORD to make the payments. I'd be
interested in knowing whether, at the same time as he makes the
mortgage payments, he can also save sufficiently for retirement, for
his next vehicle and other big ticket items, maintain appropriate cash
reserves, etc.

In other words, can he both repay the debt and do all of the other
things he must do (live within his means)? If yes, then he passes my
test for being able to afford the mortgage.




-HW "Skip" Weldon
Columbia, SC

On Thu, 10 Jan 2008 15:27:20 -0600, beliavsky[at]aol.com wrote:

- quote -

Why? He may very well be able to pay a mortgage. He's p[aying one
now.
Thumper

<liuhengyi[at]gmail.com> wrote in message
news:b71ebc5c-2e65-4742-a87e-725a247f9ef8[at]s12g2000prg.googlegroups.com...
- quote -

Look for an attractive balance transfer option from a credit card,
then max it out in a single transaction. I've seen fixed rates of 4.99
with no expiration and a 3% transfer fee, max $99 per transaction.
When complete, pay back what's left over to reduce the balance. You'll
pay interim interest on the extra money while doing renovations, but
taking all the money at one time minimizes transaction cost.

That probably compares favorably equity loans and it's unsecured. You
still own your home without lien.
--
Chris Cowles
Gainesville, FL

On Jan 10, 3:35*pm, Sandra Loosemore <nore...[at]frogsonice.com> wrote:
- quote -

If I take out another normal mortgage or first lien home equity loan
from the house once I pay off, will there be any title paper work
(conveyance or county recording etc) involved?

Thanks,
-Hengyi

liuhengyi[at]gmail.com writes:

- quote -

Of course you can take out another normal mortgage on the house once
you pay the first one off. But then you won't own the house outright
any more. :-)

-Sandra the cynic

On Jan 10, 3:25*pm, liuhen...[at]gmail.com wrote:
- quote -

Yes, it is called a first lien home equity loan. Considering how many
people are currently losing their homes due to home equity loans they
cannot repay, I advise delaying the remodeling until you can pay for
it with cash.

Hi,

The current mortgage balance for my house is only 5000, so it will be
paid off in a few months. (I'm also considering just pay it off now).
I'm also about to do some remodeling next year and would like to
borrow some money from the home equity. Since the interest rate for
home equity loan is higher than the 15-year fixed mortgage. So the
question is: Can I still have a normal mortgage on a house I own
outright? What's the best way to borrow money for this situation?

Thanks,
Hengyi