Dave Ramsey (debt free guru) would say DON'T DO IT, save until you're able to pay for the work. Obviously, you are talking about a major remodel, presumably increasing the value of your home by at least what you invest, but in todays market, what does that mean? We never expected to see our savings demolished by medical bills, nor did we plan to have long term (hopefully) support expenses. I thank God that we are ok financially and don't have to worry every day about money. Just something to think about...
Good luck, your plan sounds exciting.

I'll be paying cash.

There are several "if's" in my answer... IF you've owned your home for awhile and have a low mortage or debt to value ratio THEN I would consider a Home Equity Line but many banks are not offering them anymore. If the situation is similar AND you have the opportunity to lower your existing interest rate, I would then consider refinancing but would never tap out the equity to like 75% of the current value of the home. It all depends on the particulars.

Remodels are very exciting. I would though sell stocks or other investments when timely to invest in my home.

We paid cash, but also had a home equity line of credit, just in case something catastrophic happened (thankfully, we never used it).

I think you've gotten some excellent advice here; cash really is king as they say.
I thought I was in the minority but at least from those who've answered so far, I'm impressed to find that I am not.(not that it matters).
You've got to do what makes sense and works for you. In these economic times though, even if the bank will lend you money, I do believe that it would be prudent to re-think and maybe even scale back.
I didn't want to sound overly preachy and apologize if that was my tone, but there are many folks on here who have borrowed against their since faded equity and are not having very restful sleep.

want2bsure - funny you mentioned DR! That was my first thought when I read the original post, but I didn't think anyone would know what I was talking about!

One reason we're doing a refresh now is 1) we don't really need a total gut job, and 2) we can pay cash for the "refresh." No credit or HELOCs here.

We're paying cash as well. We've had two houses built, and it was far too easy (for me) to justify incremental increases in cost. Hey, it's only $100 here, $50 here, $250 here, and it would make the space so much better! Cash gives me a cold, hard ceiling so I can't start the features creep.

Your remodel sounds fairly extensive. Friends have suggested that we get a HELOC just in case. Good luck!

We're paying cash, too. We've been in our home for 28 years and it's paid for, but at this stage in our lives we don't want to start borrowing, especially in today's economy.

Good Luck!

In the minority here - we used cash to start, then our HELOC for the rest. As one reluctant to use credit to float any long-term purchase except a house, we did a lot of calculations before we made that decision:

- we put down 50% when we purchased, so were starting with a lot of equity in the house

- our HELOC has a very low rate of interest

- the cost of the reno tapped into about 20% of our equity, which was a comfortable margin

- housing prices in our area have come down about 20% but are holding steady

- our house is a long-term investment - we're in our early 40s and plan to stay here at least 15 years

- the mechanicals work we did was necessary and not doing it would decrease the house value and our standard of living (ie. ancient wiring/electrical could not support a clothes dryer or microwave - even my vacuum cleaner would sometimes trip a circuit; dying and inefficient 20-year-old steam boiler; uninsulated roof and old windows)

- we set a budget with the standard 20% for overages and held to that

We did the same as zeebee, some cash, the rest from a low-interest HELOC.

We're paying cash and having a back up HELOC just in case. When we bought our house 10 years ago we thought we were going to renovate in 5 years. We didn't have the mony so we saved for another 5.

A lot of people can't upfront cash once you get beyond a cetain amount and I'm okay with financing it (assuming all is right with the world/scope of project/area, etc). I financed the home itself and I condider the renovations an extension of that home.

The flip side of that right now is that with the economy having difficulty I'd rather hang onto my cash/savings for that rainy day that spend it on the kitchen then turn around and need the money and have it not be there. So even if you have money you might not want to exhaust the emergency fund completely.

We are paying cash and making sure that our improvements stay within the market for our neighborhood even though we have no plans to sell.

If you do borrow, be sure to check the terms carefully. Some "home equity" loans are worse than credit cards.

originally, I planned to pay cash with a backup HELOC. I saved for several years - dipping into it to pay for other unexpected home repairs along the way. Then I got a divorce and my ex took most of the cash I'd saved. (long story!)
I saved for another 2 years, then refinanced (part of the D) and took out equity with the refinance. I took out enough to pay for half the job, will use savings for the other half, and a HELOC for backup.
In my case, the house is really unsaleable in my area without a major kitchen renovation, so it's a necessity.
I made sure though - I still have lots of equity in the house (approx 55% of the recent appraised value) and my new fixed rate mortgage is lower interest rate and equal payments to my old loan.

We paid cash also and are almost done with the kitchen. We have 4 children so it took us about 4 years to save what we needed. Over that time period, we bought appliances when they were on sale, went to home improvement auctions for the slate floors, woodwork, doors and windows. We bought everything else online- sinks, lighting, wiring, ceiling fan, hardware and stored everything in the basement. So, when we were ready for the renovation, all we had to pay for were the cabinets (employee purchase at Kraftmaid-80% discount) and the granite. We try to live debt free except for a very small mortgage. We didn't knock down walls, just removed soffits, gutted and did everything ourselves, so kept costs at a miniumum. We spent about $15K and my realtor girlfriend feels we added at least $50K to the value of our little house. But, I am not going anywhere, so hope to just enjoy our new kitchen for years to come! We did not want to change our lifestyle to finance a kitchen. Except that I do miss my annual trips to Mexico! Maybe next year. haha

We are using a combination of some cash and some money from refinancing our home. We have plenty of equity and no other debt so this works for us.

We did a HEL...It worked for us, we have a lot of equity in our home and kept the payments of the loan and HEL to roughly 30% of our take home, so we felt comfortable with it. We are in our 30s and plan on staying in this house through retirement, so it made sense for us. Also, we had quite a bit in savings...we probably could have cash flowed the kitchen, but we did windows, roof, doors, addition. We have our fingers crossed that it will be pretty "big project" free for quite awhile.

Count me in the cash group. I lived with a kitchen where if I tugged too hard on a drawer the whole drawer front would come off (happened on two of them!) cabinet doors literally fell off, it was a disaster. But we lived that way for 4 years after buying the house to save up for the reno.

If that's not an option for you, then a home equity line of credit might be the way to go, as others have said.

Wow, thank you so much for your collective insight. I appreciate all of the advice. First, let me assure all of you that we will not jump in w/ eyes closed. :-) If anything, we tend to be overly cautious. As so many of you have said, and I agree, now is definitely the time for fiancial prudence.

We are not planning to finance the entire reno, but like others here mentioned, want to ensure that we have a contingency plan, as we are aware that any number of unexpected things might occur along the way.

Sheilaaus, you apologized if you sounded preachy--you didn't at all. I took it in the spirit intended.

want2bsure & heathermisme, I am familiar w/ Dave R.--he does have some very wise financial advice, doesn't he?

Again, thanks so much, this is just what I was looking for, advice from those who have "been there, done that". I will be sure to show this post to my dh as we continue to determine the best course of action.

And keep the advice coming--we're all ears!

Some cash, some stock. We had planned on refinancing and taking cash out, but the appraisal came in shockingly low (last three comps in the neighborhood were foreclosures AND the ugliest houses on the block ... people who were moving up into a good neighborhood by buying the cheapest houses but on apparently optimistic terms. Not a bad strategy, but terrible timing. Oh well.)

We also have a HELOC that we might use at the end for a few last odds and ends. Most everything is paid for by now, though.

We had saved up for it so paid cash.

Jbrig, Thanks for this great topic. Here are some
great links and quotes I found to share....
~boxerpups

------------------

"The most recent cost-versus-value home improvement survey by Remodeling Magazine and the National Association of Realtors found that every dollar spent added an average of 70 cents to a home's value. Kitchen projects usually fared better than average, adding something like 80-85 cents for every dollar spent.
Those averages have been dropping the last couple of years, and we expect they'll continue to do so...."

http://home-equity.interest.com/qanda/kitchen_remodeling_cost_qa.html

"OVER-SPENDING by Jamie Goldberg

.... In general, a $300,000 house does not warrant a $100,000 kitchen, unless its lived in by a professional caterer or chef, or a really serious hobby cook.

While statistics show that kitchen remodels return more of their investment cost than almost any other home project, this does not hold true if you dramatically over-spend. Think in terms of a 10- to 25-percent investment level relative to what you could realistically sell your home for in todayÂs market, ...."

http://jgkitchens.blogspot.com/2008/07/top-3-kitchen-remodeling-mistakes-you.html

From MSNBC

According to the National Association of Realtors 2005 Cost vs. Value Report:

-- The average "upscale kitchen" remodel cost $81,552 and had a payback of 84.8 percent.

-- The average midrange "major kitchen" remodel cost $43,862 and had a payback of 91 percent.

-- The average "minor kitchen" remodel cost $14,913 and had a payback of 98.5 percent.

No matter how well you plan, expect the project to "cost more and take longer than you think," cautions Sherry Ackbar, Good Housekeeping magazineÂs home editor.

http://www.msnbc.msn.com/id/14015422/ns/business-consumer_news/

Here is a link that might be useful: The cost of a new kitchen -Garden Web post Aug 08

We also paid cash for the kitchen reno, but thought I'd mention this-

Our city (Minneapolis) has loan programs for home-owners. Most are geared toward lower-income families, but our neighborhood recently started a program with no income limits on the high end. The rate was 4%. Not sure where you live, but your city may have a similar program. I'm not sure the amounts available, I'm sure not close enough to cover many of the beautiful kitchens on here, but it's something to look in to!

We're hoping to remodel, and I would love to add on about 90sq ft to make the kitchen/bathroom/mudroom a better space - that will depend on cost. When we moved in 5 years ago, the plan at this point was to either refi or get a HEL. Our house has dropped too much in value for that to be worth it, and neither of us want to take on extra payment just in case. So, we'll pay in cash instead. We're aggressively saving for the kitchen fund. DH has had more overtime lately, and instead of grumbling he's like "more for the new fridge". I've also said no Christmas/birthday/annivesary presents for me - I want a new stove for the kitchen.

I don't expect to have enough money for another 18 months - 2 years. It might be longer. But we'll get there.

A bonus of the extra savings is that if something does happen to DH"s job, we can use the kitchen savings as extra emergency fund. I also agree with a poster above to make sure you don't use your emergency fund for the kitchen - it has to stay separate in case you need that money after the kitchen is done.

I paid cash for my kitchen reno five years ago and am about to have a bathroom reno. I'll pay cash for that, too. I also buy used cars for cash. I really believe in paying as you go.

I plan to retire in less than two years, debt-free. Others I know are forced to go on working in order to pay off debt.

So far, we have paid cash. The next stage of our whole house remodeling will be the most expensive part-two small bump-outs, re-roofing, siding, and a new driveway. We will either have to delay this step for another year or two or three, or refinance and take out some equity. Unless we can get a Very favorable interest rate, we are not really wanting to refinance.

For our bathroom renovation last year, we paid cash. We did get a HELOC just in case, but we did not tap it. Even though paying cash meant we had to scrip and save for a l-o-n-g time, I'm so glad I don't have the worry about yet another bill, especially during this Great Recession. Cash is the best route.

Earlier this year, we were able to refinance our mortgage at an incredible 2.99% rate, and since we had a fair amount of equity in our house, we borrowed some extra dollars to help pay for the kitchen remodel. We also cashed in some stock and used some of our savings. I would not have been able to do it without some financing, but am thankful I did not need to finance the whole project.

We've paid cash for everything we've done thus far and have put several wanted things on hold so that we can save up for them. Our projects have been spread out over the entire house, however, and the kitchen is just getting a refresh.

We're paying cash for a mid-range re-do. Right now we're building back our emergency fund after having to pay to get out of a house we moved out of a year ago due to a new job (we were upside down). Starting in September, emergency fund will be complete, and we'll be on to saving for the kitchen! Should be able to get there in March/April 2010. I don't think we'll be able to get a HELOC for backup, so I'm unsure of what we'll do if we go majorly over budget. Likely, we'll slow down the kitchen a bit and just amass some add'l cash or perhaps dip a little bit into the emergency fund.
In the meantime, no travel, limited gift giving, and not so much eating out!

Cash here too. I inherited some money. We're very debt adverse, but unfortunately DH picked this house before we got married, and it has needed updates to lots of areas. He refused to wait till we got married and sold my house. Then we could have just plunked all that equity I had and what he'd saved into a newer home and more what we wanted.

But I'm not complaining. Next is to get new vanity and top and paint the bathroom. After that, we'd like to put some french doors in the LR leading to a patio out back. But that will come in time.

stock to pay for cabinets
cash for the rest

If we run out of cash, we won't proceed till we have it.

We will not go into debt for a kitchen for sure!

I am one who follows Dave Ramsey's advice and strongly believes in living within your means and having no debt other than the house, regardless of income level.

We paid relatively little for our house in 1996. We are investing very aggressively for retirement and the kids' college funds. We also refinanced into a 15-year mortgage at Since our loan-to-value starting the project was less than 25%, this is a long-term capital expenditure that increases the value of our home, and our HELOC is currently at 2.75% making it essentially free to borrow after inflation--it made sense to use the HELOC rather than compromise our master plan. Even after the decline in home prices, our current loan-to-value is about 35%.

The concern for the future is that runaway Federal borrowing may drive up interest rates significantly. HELOCs are all variable rate. Taxes on productive citizens will soon go up, reducing cash flow for most homeowners. So...there is a risk. If you use a HELOC, be prepared to pay it off fast.

For most people, I would NOT recommend spending all your cash to remodel. You may need it for something else.

We paid cash for our remodel and wouldn't have it any other way. We feel if we cannot afford it right now it's probably not a good time to do it.

We paid cash for some and used a home equity line of credit for the rest. Our first mortgage just got paid off, so now we just have this modest second mortgage to contend with, which I plan on paying off in 5 years. But we did a major addition (900 sq ft two story addition), plus complete kitchen gut and remodel.

We paid cash for our home build (it took 6 years DIY) and our land will be paid off in just a couple more years. I am getting to the age where I don't want to have to worry about facing 30 years of mortgage payments. The economy is just too unstable to risk that.

100% HELOC for us - I got a great rate 3.2% and paid off our 2nd with it. It would have taken me too long to save up for it, and especially with prices always rising, it would have cost me more in the future too. We bought our house in 1993, so even with the HELOC and current values, our LTV ratio is 40% (and that's not taking into account that the recent comps are 75k over my current value).

If something were to happen to us financially and we had to sell our house, we would have had to do something with the kitchen - floors, cabinets, appliances, and counter tops at a minimum. We probably could have done it - leaving the old layout - for ~$20k with DIY. Which means we still would have needed to finance it.

Even though our remodel was more of a moderate, I believe we will get closer to the 90% of the cost back in value due to the fact that we opened up our layout, which is very desirable now. We could always borrow against our 401k if we had to pay off the loan, but I plan to retire at 55 - I'll have some debt, but not much and that way maybe we'll be low-income and my kids can get financial aid for college :-)

I'm not a "always pay cash" person, but I also do not like having a lot of debt - pay off my cc every month (unless I get 0%), but - doesn't it kill you to see all the people who when way beyond their credit limits, and they are having all their debt written off?