Where should I get the $$$? (financial advice pls)

[dwcopple]

We are in the process of doing a kitchen renovation. I need around $3K to complete it. I do NOT want to use money from the savings if at all possible. There is 3-4 things I am considering.
1. Refinance and do a cash out. Current mortgage has 12yrs left and $58,500 owed @ 4.5%. Refi for 15yr fixed is 2.875% today. Closing and other [censored] fees amount to around $2K-ouch.
2. Home equity loan @ 1.99%. Fixed at 60 mos repay with no penalty for early payoff. $400 or so in fees to originate.
3. Home equity line of credit. Higher rate (3.125%)than above but around $230 fees to originate.
4. Get a 0% credit card for 14mos and use that pay builder and buy materials. (need to see if he takes credit card or if there is convenience checks included with 0% introductory rate)

My credit score is 831. What makes the most sense? In all reality we will have it payed back by fall this year as I do side jobs in the summer and my wife is a wedding photographer with 5 currently booked at $1k a pop.

 

[threeputtpar]

I'd say no to 1 because of the usuary fees included.

Out of the remaining 3, I'd actually suggest 4 because all three will result in a hard search of your credit report and if you ever needed it again the C/C could be utilized. They are always throwing "introductory" rates at me to get me to use the couple of cards I do have that I never use.

Is there a reason why you'd rather not tap savings? Or even put it off until the cash comes in from extra summer gigs? Just curious, as that would be what I'd really suggest.

 

[Kuato]

If you can live with the kitchen, why not just finish it once your wife has completed her weddings?

 

[JayhawkRoy]

If you can pay it back by fall, then use your savings and pay yourself back as quickly as you can. All of your other options may cost you $200+ to use. Pay yourself the $200 at the end into your savings and come out ahead. I have been doing this for many years and the only key is prompt payments to yourself without fail.

Option 5 might be a signature loan from your credit union or bank, with no fees attached. My parents did this years ago to do home renovations. I chose my option above to cover my renovation costs.

Be wary of the zero percent credit card/convenience check option as there are probably fees attached.

 

[surfstar]

I'd keep searching for a better refi deal. This should save you $ in the long run.

 

[donnyj08]

do it a little at a time over the next six months.

 

[Smokescreen]

I am surprised that you don't already have a credit card of some kind. That's almost unheard of in North American Society.Don't get me wrong, I applaud it. Most people I know are up to their eyeballs or more in credit card debt. I pay my zero fee benefits card off each month so I don't incur the wrath of interest.

I second taking it out of savings if you had to get it done right away, but if you can meter out the reno over time and pay or wait until you had the money that would be the best option.

 

[Quattro Pete]

Originally Posted By: Smokescreen
I am surprised that you don't already have a credit card of some kind.

He didn't say he has no credit card. He said he has no 0% interest credit card.

 

[JHZR2]

You don't provide info on your income. Hate to sound harsh, but you're talking $3k, not $30k. You should be able to cash flow this in short time, otherwise you can not afford it.

Personally if I were in your shoes, I'd reconsider on the basis of insufficient means, and do a real good scrub of budget to see if it is sensible to try.

Assuming your budget shows enough free cash flow, I'd probably opt for the 0% CC and cash flow as much as I can to minimize the balance. But I'd nay do this if I had a payment plan to pay it off, and set up a separate allotment of my salary so I don't see the money.

The issue here is that you will have temptation to defer payment, which we don't want. Use the 0% with a dedicated payment plan to pay off fully in no time (less than 6mo is optimal), or else reconsider.

 

[KJack]

58k at 4.5% for 15 years = $79,880 at 491 a month
58k at 2.875% for 15 years =$71,486 at $444 a month

numbers do not include taxes, insurance etc

 

[Vikas]

I usually don't agree with JHZR2 (only kidding!) But he has a point. I am suspecting OP meant $30K. Anybody who is thinking of taking out loan for 3K and considers an option of paying $400 in origination fee has a screw loose.

 

[HTSS_TR]

Try refinance $62k for 15 years with zero closing cost, the interest rate may be a little higher than 2.875% but it will be much lower than 4.5%.

 

[dwcopple]

Originally Posted By: KJack
58k at 4.5% for 15 years = $79,880 at 491 a month
58k at 2.875% for 15 years =$71,486 at $444 a month

numbers do not include taxes, insurance etc
Nor do they include the added amount I'd be borrowing.

Originally Posted By: Quattro Pete
Originally Posted By: Smokescreen
I am surprised that you don't already have a credit card of some kind.

He didn't say he has no credit card. He said he has no 0% interest credit card.
I have a Chase Freedom that we use only for gas each month. It gives us 5% cash back so its a no-brainer. It's 0% period is done and we pay it off each month anyways. I'd get a new card that has 0% for 14 mos.
Originally Posted By: JHZR2
The issue here is that you will have temptation to defer payment, which we don't want. Use the 0% with a dedicated payment plan to pay off fully in no time (less than 6mo is optimal), or else reconsider.
I would NEVER defer. I have seen the affects of CC debt. (ex-fiancee was a mess financially. Glad I got out of that one.)

I think I am leaning towards the CC as well. Fees for loans are ridiculous. I hate banks. Also it would appear the days of the TRUE NO COST REFINANCE are loooong gone. My mortgage was sold to Freddie Mac on 12/8/09 and the cutoff for Obama's initiative is 5/31/09.

 

[javacontour]

Run the numbers for #1 with paying 13 mortgage payments each year. Just thinking outloud in very ROUGH numbers using the original principle, you are going to save almost 1/2 of the refi fees in the first year. By the end of three years you've saved more than the $2K to

Additionally, your P&I payments will be about about $70mo cheaper give or take and the extra 3K isn't going to add that much. You could probably make an extra payment each year. Pay every 4 weeks and you'll knock two years off the mortgage with early payments AND that extra payment each year.

Again, very rough numbers just rolling it around in my head. But if you are in the home for the long term, option #1 pays off sometime in year 3 of the 15 years. Everything beyond that is saved interest.

Not to mention, if you get a few grand back in escrows coming your way, that's money you can use now until they adjust your payment to catch up the escrow accounts.

 

[FoxS]

If the refi is cheaper than your current mortgage then that kills 2 birds with 1 stone and is the best option.

Option 2 is not bad from an interest rate point but the real rate is higher because if the $400 fee

Option 3 needs to be compared on a total basis to option 2

Option 4 is best if your refi does not save you money vs existing mortgage.

The other option is what I might do which is borrow from my 401k. Why? Because the stock market is high so its a good time to sell and you pay yourself back with interest. Fees are typically minimal.

If you go with the cc and can't get free convenience checks, consider paying the contractor with Home Depot gift cards. Even better, buy them from a supermarket with a credit card that gives you a lot of cash back.

 

[dwcopple]

One other thing, the appraisal fee ($400!!!!) cannot be rolled in, and must be paid in cash if I chose the refi. Has anyone had luck with US Bank? They supposedly have a 0 closing refi for the same rate as my local guys. There is no branches in MI though so not sure how that exactly works.

 

[Tdbo]

Originally Posted By: surfstar
I'd keep searching for a better refi deal. This should save you $ in the long run.


+1, and a better deal on a home equity line.

 

[hattaresguy]

Doing a refinance on a mortgage is only a good deal if you plan on keeping the note for the full term. If you plan on paying it off sooner interest matters less. Run the numbers for both options but concentrate less on the payment and more on the total cost of the capital your borrowing. Also factor in opportunity cost. IE is it worth paying off a secure low interest note when the money might be put towards more profitable uses?

Also its $3k right? Just save it up and pay for it, why go threw all this hassle over $3k?

You should be paying for all the materials on a CC to get the points. I charge every single thing I can on my business card to get the points, and its cheaper than writing a check.

A check costs:
Check a few cents
Stamp .41 cents
envelope

Amex swipe is free to me, and clicking pay bill online is also free.

Charge everything!!! Amex is going to buy my boat a chart plotter/sonar/radar combo unit in a couple of months and Discover is paying for my airline tickets on my next trip.

 

[Pop_Rivit]

Originally Posted By: dwcopple
We are in the process of doing a kitchen renovation. I need around $3K to complete it.


Just three thousand dollars and you're considering refinancing and juggling your finances around?

Live with it as is, save up the money, and then pay cash to do it. You can find plenty of sideline work and make that much in a month or two.

 

[dwcopple]

Originally Posted By: hattaresguy
Amex swipe is free to me, and clicking pay bill online is also free.

Charge everything!!! Amex is going to buy my boat a chart plotter/sonar/radar combo unit in a couple of months and Discover is paying for my airline tickets on my next trip.
Doesn't Amex have annual fees, LOL? I am no stranger to rewards systems on cards. That is why I have a Freedom Visa that gives 2% cash back and 5% cash back on various categories each quarter. Our debit card gives 1pt/$2 spent and we just cashed in points for Home Depot gift cards and Mobil gas cards.
Originally Posted By: Pop_Rivit
Just three thousand dollars and you're considering refinancing and juggling your finances around?

Live with it as is, save up the money, and then pay cash to do it. You can find plenty of sideline work and make that much in a month or two.
Pop, you are the last person I'd take advice from, no offense, but your pompous attitude you walk around with on this forum sickens me. Congratulations on your own success, really, but not everyone makes the bank that you do, though you seem to scoff at that idea.

That said, I have a life insurance policy that was started for me by my parents when I was born through Thrivent. It has a nice cash value that is accessible at any time and can be used like a bank account of sorts. I spoke with my advisor there and he said that is the wisest choice especially if I plan on funding it back within a few months anyways. So it appears right now that is the route we are taking.
I apologize that I work for the Government and that the majority of the public thinks we are overpaid and have Cadillac insurance plans even though I took a paycut for the past two years and on top of that, come July I have to find a way to pay for 20% of my $16,430 family insurance plan too. Thanks voters, you truly are ignorant.