Greetings Both/Amy, My suggestion relates to more skillful use of your income tax refund. That substantial cheque from the IRS after income tax returns go in every year may gladden your husband's heart ... ... but - it - drains - his - wallet!! You know the amount of his tax refund last year. If he gets paid monthly, divide that amount by 12 (or the number of paycheques that he receives during the year). If he gets paid monthly, as of Jan. 31, he made a loan to the IRS of that amount, on which he received no benefit, i.e. they paid him no interest on that amount ... and they held it until the date of the refund ... if it were June 1, that loan was for 16 months. I suggest that you calculate how much interest you're paying on your HELOC on that amount for 16 months. As of the end of Feb., he made another interest-free loan of the same amount to the IRS ... for 15 months. Calculate how much interest you're paying on your HELOC on that amount for that period. As of the end of Dec., he'd made 12 such loans. Calculate the interest on each of those amounts for the relevant periods, then add them all together. For example, on $1,200. at 5%, the amount would be $60.00 if the full amount ran for a full year, but when we average, it's about half of that period, it'd be $30. for the year. Then we figure that the full amount was owing for 4 months, Jan. 31 '09 till May 31 '09, or 1/3 of $60., or $20., which means $50.00 in total. Then I propose that you get 5 - $10.00 bills, fan them out in your hand and, if your husband smokes, ask him to get out his cigaret lighter and burn them. If he shows a willingness to do so ... snatch the bills away in a hurry. But - that's about what his lack of financial acumen is costing your family. Every year. Reduce the amount of withholding by that amount and use it to pay down your HELOC! That'll produce a benefit for your family - interest-free loans to the IRS don't. Good wishes for increasingly skillful use of your income and assets, year by year. Good wishes also for having a great year in 2010. ole joyful

I used to think morality mattered in situations like this, but I'm not sure if I feel that way anymore. I sold a house to young immigrants from Poland once, and their free-wheeling/creative aggression when it came to questioning financial rules was eye-opening. Afterwards I wondered if it was because they grew up with a less controlled economic system than ours. Capitalism is inherently ruthless at the macro level. Why should it suddenly grow a conscience at the micro level? Smart investing require making smart business decisions. Which path makes the most sense financially for your family, long term? Crunch the numbers, make a decision, and then live with it. Personally, if I were in this situation my first responsibility would be to protect my household's financial strength, no matter what it took.

We don't have credit cards. this is the situation. we have a house now that has a balence of $47K. The house comps have it going for $75K. Of course, I know you can not count on getting what you think you will get, especially when you need it. The house we are looking has an asking price of $89K. My realtor hasn't done a whole lot of research yet, but she said that is a bit high for the area. I was looking at the real estate data for my city today (san antonio) and although sales are a little bit down, houses are still appreciating. Days on the market are still a little longer, but not drastically. Price per square foot has gone up, not much, but its gone up. so, we don't have much in savings, so we would need the equity from our present house to put down on the new house. I'm obviously not working with high numbers here. the average house here is $147K. Still way affordable compared to a whole lot of cities. What I'm trying to do here is get an idea, just knock it around, about what my options are and what anyone thinks of the situation. I value the advice I receive here and I really enjoy reading everyone's posts!

Would the below be a correct/ accurate estimate? (Example is being slightly conservative?) 2 acre bought for $100K cash, no financing at all. From here on out, would it be correct to say we now have to ignore that we just spent 100k on property as far as any future construction loan is concerned? Based on several comments in this old thread, that seems to be the case, as it appears appraisal for total finished property (house plus land) does not really seem to consider market value paid for land at that time and final appraisal appears to be much lower than combined build cost and property cost. Construction Cost from Builder: $500k Based on several comments above, it sounds like most appraisals are extremely short when considering land value. (seems odd because where we live, zip code 54115, our county web site shows “fair market value” for both property and the “improvements” (house and such). Example: Nice newly built house in area just bought, county site shows land value at $86k (purchase price/ appraisal value), then improvement/ building/ house at $589k. The public tax bill shows the tax is paid as a single payment, but the site does separate out the two. Bank will loan 80% of total appraised value basically ignoring actual construction cost builder will charge. Using our 2 acre lot example and 500k construction cost: o Potential low appraisal value might be $525k. (even though land was 100K fair market, and cost to build is 500K) o So bank will lend 80% of $525k, meaning $420k At construction loan closing, we need to bring ~$80k in cash ($500k build cost minus $420k possible loan/ financed amount). In this example, our $100k already paid for land at market value did not really contribute much if any at all. So total upfront cash/ down-payment we spent on completed property (original land purchase if 100k plus 80k construction down-payment) is $180k or about 34% of final appraised value? Continuing to use the example above, with a total loan of $420k plus our $180K spent in cash for total initial cost is $600k on newly appraised property of $525k at construction loan closing, we would already be ~$75k in negative equity? I understand construction is generally more expensive than buying prebuilt, but with the mantra that is taught “house is an investment”, why would anyone ever want to build new as it will take a very long time to reduce that negative equity. Any ROI appears to be horrendous compared to other investment areas. Please understand I have no real idea other than my wife and I bought some property and I am trying to get a a somewhat accurate gage of how much additional cash we may need for a construction loan hopefully not more than $500k. Based on the comments above, I am now thinking better to just sell and maybe get our $100k back as best able, put into other investment instead and wait until a pre-built hopefully come on market that has what we are looking for. Then use that $100k (or more) on a house where we could already seem some form of equity return. How often does it seem final “market value” is so much less than build cost plus land? Is there a general rule of thumb that can be applied for rough estimates? (maybe take build cost plus land value, then minus a certain percentage?)