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Homeowners: Where Will You Find the Money for All Those Spring Projects?

Ask your trusted banker if either of these products work for you.

Local banks and credit unions have some great products to help make that home of yours a special place. I am going to breakdown two affordable primary loan types. Both can be tax deductible, but check with your tax accountant to see how it works for you.

Home equity line

This option has excellent purposes. It's flexible for use in home improvements, debt consolidations (as long as you are diligent and do not run up the credit accounts you just paid off), large purchases, vacations, future needs, children's college expenses, and especially for emergency needs.

Your limit is based on the equity in your home.

It's a variable rate, but it is tied to prime. Check with your bank.

The line comes with a borrowing period usually up to 10 years with an additional 15 to 20 years for payback of any remaining balance at that time.

Borrow as you need, and pay it back quickly or on a minimum payment amount. 

Beware of early an closure fee. You can have a zero balance, just dont close the account. Your bank will have specifics on this.

Traditional home equity loan

Good for one-time purchases like fixed home improvement projects or large ticket items. By fixed home improvement projects, I mean projects with a set budget that will not change.

The rate and term are fixed, and all funds are borrowed up front. You begin paying interest from the start. However, beware of a pre-payment penalty if you pay it off early. Each bank will have specifics on this.

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James R Hoffa March 13, 2012 at 07:02 pm
With the real estate market where it currently is, cash is the only smart way to go for home improvement projects.
Even if the market was better, I'm an all cash guy anyway like Steve. When I bought my new Jeep Grand Cherokee at the dealership, I used all cash, $100 bills. They looked at me like I was a drug dealer and the dealership's cashier was upset with me because they made her check every single bill, all 300 of them, with one of those counterfeit detecting markers. I did not feel bad for them :-)
James Gottemoller March 13, 2012 at 07:07 pm
Steve, great to hear. You are in an excellent position. You will find more enjoyment out of your home. The improvements will have an impact on the value. When I was doing loans and lines with a large institution, when you add square footage, update a kitchen or bathroom, and/or add a garage, you are making improvements to the value of your home. Keep in mind the value wont go up dollar per dollar spent. But it will improve. Housing market seems to be getting better. Homes are selling more quicker locally. It will take several months of data to determine the impact. I would definitely visit with your banker once everything is completed. Thank you for the follow up article.
Craig March 13, 2012 at 07:10 pm
Hoffa- did you have to sign an anti money laundering form?
My guess is they had three people counting separately fearing a screw up. Next time have a cashiers check to save yourself some time.
mau March 13, 2012 at 07:23 pm
Why take out a loan. Do the work yourself, as you have the money and time. Our biggest expense was the bathrooms which included all new water piping in the basement. We started buying all the supplies as we had the money and when spring came started the project. What we didn't know how to do, we learned as we went. Do-It-Yourself in West Allis was a big help. You learn to live with the mess.
Steve March 13, 2012 at 07:24 pm
I was always into to do it yourself mentality but when I currently calculated my time vs theirs I was losing money doing it myself. Now building a garage is one thing but even some of the other work i could have done was cheaper and not worth my time to figure out.
Now when it comes to landscaping hands off, that's my job :) I've got the itch already with all this warm weather, and my grass is already growing in areas close to the house.
James Gottemoller March 13, 2012 at 07:25 pm
Randy 1949, I am sorry to say savings and CD interest is real low. My recommendation is to have a discussion with a financial representative. The reason I say this is because a good rep will listen to what you are trying to achieve and then make a recommendation that meets your needs. Something with a better rate but without the risks associated with stocks and emerging markets. I am not licensed so that is where it is most important to speak with someone licensed and qualified. I have had great experience with some reps. Added protection for you, I would recommend that you speak with your banker at your branch. It is always best to do business with people you trust. Thanks for taking the time to comment.
mau March 13, 2012 at 07:26 pm
We did a tear off to the board, replaced bad boards, and reshingled our house and 2 garages. That was back in our younger days when I could do that kind of work. Our 15 year old shingles went bad and we needed to do our house last year and opted on hiring someone. Big mistake. My husband spent as much time on that roof as the contractor. The contractor did a horrible job and this guy came highly recommended. We have to reshingle the garages too but will hire our son and his friends to help.
James Gottemoller March 13, 2012 at 07:30 pm
James Hoffa, cash is a wonderful option. The sale is complete and you own it. Transactions over $10k require some paperwork. I would recommend a cashier check to avoid carrying large amounts of cash. It had to be fun counting out the $100's.
Steve March 13, 2012 at 07:31 pm
Pay them in beer.
James Gottemoller March 13, 2012 at 07:32 pm
Craig, thanks for jumping in. The 401k has come in handy. I unfortunately had to pay the penalty. But I did what you said, took what I needed the 1 year and then took out to pay the taxes.
mau March 13, 2012 at 07:41 pm
@Steve, they like to eat but beer would be cheaper :)
mau March 13, 2012 at 07:46 pm
My husband is ultra-critical so it's best we do it ourselves. Otherwise we would end up redoing it anyway. We did hire contractors to put in new windows and siding and were very happy. We have some big outside projects this summer. And we have to continue on our house remodel project.
James R Hoffa March 13, 2012 at 08:09 pm
@Craig -
Indeed, they made me sign the FinCEN form, so I'm sure Hoffa's name is in the FBI and/or secret service database. I kinda did it on purpose just to see the reaction I'd get. I've actually bought two cars that way - one for $30k and the other for $18.5k. Surprisingly, the reaction I received on the $18.5k transaction was almost the complete opposite of the reaction I received on the $30k transaction. Go figure! Surprisingly though, when I withdrew the $18.5k in cash, my bank didn't ask me to sign a FinCEN form. They also screwed up and gave me $6k over the requested amount. Lucky for that teller, Hoffa is an honest dude and returned the next day with the extra cash when the mistake was realized.
Craig March 13, 2012 at 08:27 pm
Hoffa is an honest man and will be rewarded in the next life.
Karma is a good thing.
James Gottemoller March 14, 2012 at 12:42 am
Mau, I have to hand it to you, saving and buying materials as you go is a good approach. Good judgement in that you recognize your limits by having someone do the windows. As you can see there are multiple ways to find the funding to get the work done. thanks for sharing.
Randy1949 March 14, 2012 at 01:15 am
@Craig -- I'll be turning 63 halfway through the project. I don't think spacing out the costs over two different years will make any difference. That's about the only upside of being in the lowest bracket.
@JRH -- I have to go with what I can do myself. Metal wouldn't suit the architectural style of my house, unfortunately. I have to tear down to wood, replace some of the decking, and re-shingle with 25 year shingles this time. Beyond that, let my kid worry. @Mau -- When we had a major leak last fall I called a roofer. He took a look and said "You'll need a carpenter to fix the decking." I rolled my eyes and figured I could do shingling myself for a lot less money. And I can fix the decking too.
mau March 14, 2012 at 01:32 am
@Randy, when we got down to the roof boards we found out they had nailed into thin air. So the roof was never solid. We went with plywood that we screwed onto the studs.
When they were building the subdivision nearby I saw the roofers lay the tar paper vertical instead of horizontal. On other houses they laid it horizontal but left no overlap.
Craig March 14, 2012 at 02:02 am
Randy: If the withdrawal won't affect your bracket- then it doesn't pay to spread it over two calendar years.
They do make metal roofing that appears to be shingles- even with granular texture. 40 year shingles are not a lot more costly, at least compare them. If you have to do a tear off, I like the idea of ice and watershield over the entire roof. It gives you time to nail on the new shingles, and is not a lot of extra bucks in material. Cheap insurance. The ice and water shield directions say to cover 3 feet from the inside wall- not the gutter. This equates to two rows on a typical overhang- something not done by some roofers.
James R Hoffa March 14, 2012 at 02:07 am
@Randy1949 -
Is the decking ply, particle, or something else?
Randy1949 March 14, 2012 at 02:25 am
@JRH -- it's half-inch plywood, I'm pretty sure. My father installed a pitched roof over a flat roof in 1992. It's a strange situation to be sure. And he used twenty year shingles, which lasted precisely that. Honesty in advertising. The roof is taking some decking damage around the chimney flashings and vents. I'm going to have to re-work that.
@Craig -- our overhang is deeper than two rows, and it's flatter than the rest of the roof so we have a flat roof system on it. I'm only doing work on the pitched part. The flatter areas we redid in 2005, and we had a contractor for it. I'm doing it myself from now on. Is ice and water shield a higher grade of tar-paper?
Craig March 14, 2012 at 02:45 am
Randy: Ice and water shield is a self adhesive rubber like membrane that comes in 33 foot rolls, 3 feet wide. It is similar to a roll of shingles, but is made to prevent ice dams from causing leaks. The membrane seals itself around nails and is great around chimneys and valleys (you still need flashing).
If you were pleased with the contractor's work on the flat part, get an estimate for the pitched roof and ask some questions if the Ice and Water shield is a good applcation. Then when you do the work yourself, you have some expert advice to follow. ;)
Craig March 14, 2012 at 02:48 am
The short answer is Ice and water shield is an ultra grade of tarpaper.
James R Hoffa March 14, 2012 at 03:07 am
@Randy1949 -
The 1/2" ply should be a great foundation to work with. Those with particle board, I feel for, as that stuff is completely worthless in roofing applications in my honest opinion! What kind of damage is there with the ply exactly? I had two sheets that were cracked from a large branch falling on the roof. Instead of replacing, I merely added some lateral supports between the trusses, screwed down (like mau), tar papered, and shingled over. Dry as bone to this day and never a problem. Water damaged/warped ply will still work just fine if perfect aesthetics aren't an issue. Keeping water from getting to the ply is the important part that counts. The rubber membranes around your chimney and vents, as suggested by Craig, would be ideal in helping to prevent ice dams and adding an extra layer of vapor/moisture protection in those areas. Most important though is still doing the flashing correctly and layering the flashing into your rows of shingles. Best tip I can give you is to make sure to nail your shingles on the designated nail line and be sure to stagger your tar paper and shingles appropriately. The most frequent problems occurring with poor roofing jobs are almost always resultant from nailing outside the designated nail line on the shingles. Contractors are notorious for doing this! Good luck with the project and I hope it turns out great for you and the Mrs!
mau March 14, 2012 at 03:10 am
I forgot about the ice dam. We requested that. I think we did at least a 4 ft edge. Also replaced the ridge vent. The old roof was 25 year and lasted about 15. All the edges started curling. Same thing happened to everyone we knew who put new shingles on about the same time. The warrantee is a joke. They pro-rate it and you need the original packaging to prove who made the shingle, save a full unbroken shingle you take off, contact an insurance company, request the paperwork, fill it out and mail in the shingle. We had everything but never did it.
mau March 14, 2012 at 03:13 am
Don't forget wind resistance. I think we went with around 120mph. We get a lot of strong winds and the recommended 80mph or around there, we didn't trust.
James Gottemoller March 15, 2012 at 02:00 am
Great comments and discussions. I will be posting articles weekly. Articles to come, what is online banking and how to ease your banking? /// How does that debit card work? /// Measures to take to avoid the ugly overdraft? Absolutely, I welcome posed to me as the topic of the week.
Jenn Collins March 16, 2012 at 12:32 pm
We installed central air last summer and replaced our boiler in one big project. We were able to use our Home Depot credit card, which had a special 0% interest for 12 months. Over the course of the year we've paid it off, interest-free.
James Gottemoller March 16, 2012 at 02:39 pm
Jenn, The o% interest is a great option. This along with using a credit card is a good option too. It is most effective when it is a medium to small purchase and you are in the position to pay it off quickly. It is only a danger if you have to carry a balance on the card for a length of time and interest charges in the 9-15% range or sometimes even higher. Jenn, thank you for sharing
James Gottemoller March 16, 2012 at 02:41 pm
I think the main reason I like to recommend a home equity line of credit is that it can be a great tool in your arsenal of credit sources. It isnt the only one. But it can be a great access to a larger source of cash quickly.
James Gottemoller March 16, 2012 at 02:47 pm
Several other uses, management tool to have available if you are retiring and want the access to what you built over the years. This next option may have changed over the years, but here it is. Family member going into a nursing home and you dont want to sell the home. My past experience is that it is hard to get the open-ended line of credit from an executor standpoint versus the homeowner signing. If you think this situation is going to arise for you, speak with your family and seek out your trusted banker. Plan your finances dont let finances surprise you....
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