Our house, like many people's, has seriously devalued. That means that even without any kind of perceived equity HELOC we're upside-down. It's going to take a looong time for things to recover which means we're here for the long haul, as opposed to the next 2-5 years as we had originally thought. So what actually started out as a surface fix-up has become a very detailed, involved whole-house remodel. Of course, due to the whole no equity thing (along with a few other factors), we're doing this on a budget, DIY and slowly. BUT, I'm getting what I want and what will make me happy (within reason of course). So, yeah, we're doing a remodel but we're doing it for us, not anything else.

mine was a 100% DIY.. i had the cash on hand to do the work.. i plan on being here for a long long time.. and I just pumped about $22k into the economy.. i also figure the sweat equity wouldn't hurt when the market starts to turn around and I look at getting a loan to add on..

if you are very very secure in your job.. and can spend the money and still have a few months of padding in your savings then by all means.. go for it..

pbrisjar- I don't know what HELOC means. Please reply regarding. It sounds like your home is worth less now than when your bought it. Am I correct? If that is so, stay there, work it out, and wait. You are probably young and you will survive this "crisis" for sure. Don't spend money on credit cards!

We're paying cash and planning on staying here a long time. We're lucky enough to be in a neighbourhood where prices don't go down. They will not go up in any appreciable way for a while, but we have a freehold property right downtown and there is always someone who wants to buy your house.

The reno is more of an indulgence than an investment for us so - no we don't regret it - not spending the money at least. We regret passing up a couple of things we really liked but didn't buy, but that's about it.

That said - if someone was thinnking about renovating a house right now to sell it and make a profit, I'd be the first to caution them against it. Especially if they were thinking about borrowing money to do it.

HELOC - home equity line of credit. We have no equity - we are in fact in rather serious negative equity at current figures. It sucks as I really don't like this house (Hubby bought it before we were married) and was really counting on being out of it soon(ish).

While I'm not ready for retirement, I'm not that young. We're only doing short-term credit and only on cards with low/no interest. It's all we can do but I think that's better anyhow.

sailor - I agree with you. Been there, done that. I am concerned with the folks who have purchased homes with the low or NO down pay - there are many - why would anyone get into this market without having some savings/investments?

I feel like favabeans5- I just stimulated the economy! I saved for the last 3 years to re-do our kitchen. We did 50% of the work, bought budget cabinets, and looked for the best deals on appliances and counter tops.

My sis-n-law opted not to do her kitchen because her husband's job is not very secure right now. You need to be sure you won't need the money you've saved or get over your head in loans, if your financial situation should change.

I've lived in my house since 1993 and by spring 2008 it desperately needed a new kitchen. I have a lot of equity (still) and had a lot of cash at the time, and I remodeled it for me, not for resale. If I'd known in April that the market was going to crash in Oct., I might have waited until Oct. just to see if I could get better prices, but of course none of us knew.

I have to say as someone who is just starting the kitchen redo process, we have found that there seems, at least so far to be some additional discounts right now. Everyday DH and I look at each other and say, maybe we shouldn't be doing this at this time, but really it probably is the most economical time to do it! I too feel like we are stimulating the economy.

Since we had water damage this summer, insurance is covering a fair chunk of what we are doing. We paid off our mortgage early this year, we have cash on hand to do the things above what insurance is paying, and this is a DIY project. I don't have any concern about it.

We would never have embarked on something like this if we needed to borrow to do it. We're very strict with ourselves about that and don't do anything we don't have cash to pay for.

Here's my question ... we are still planning on moving ahead, and DH's job doesn't seem to be in any jeopardy at this point. We *were* going to pay cash, but now I'm thinking I want to keep the cash. We have quite a bit of equity in the house, almost three times as much as we need to do the remodel (it's more than just the kitchen). Our mortgage-to-income ratio is only about 9%.

DOes it make sense to use a HELOC and hang onto the cash at this point? I know it will cost more in the long run, but who knows what the short term will bring. I guess I feel safer with as much cash on hand as possible.

Well, on the other end: from my experience this year: homeowners who get granite countertops installed & splash & cheap tile for floor and also, re-do bathroom showers and vanities: have turned around and sold their house in a week. (Texas, Dallas). 6 times this year: I have seen this: One even had the house sold before the install date!
Yes, lost several jobs to the lost of jobs: moves: 401K crash!
Worse month this year: October and November for granite countertop sales!
September 2008: highest sales for the year! Weird! right!

You have to ask yourself:
What is best for you & your family? What is most important to you? What are you willing to do? You have to live there! Enjoy life!

Segbrown,

I'm pretty hardcore about financial matters, but I would definitely pay cash. And I'd be sure I had enough cash left after the reno to live for 6 months with no income. I definitely wouldn't take a HELOC. If things get so bad down the road, your home equity is still there to take advantage of (but if you pay cash and keep 6 months expenses on hand, you shouldn't need to).

Well, I guess the fear is that the home equity won't be worth as much if things get really bad down the road. It seems like only people who don't need loans can get them right now, and right now we don't "need" it. (That's an oversimplification, of course.)

...Okay, I just talked to DH, who has talked to our financial advisor, who has recommended using our HELOC and keeping the cash. Everyone's situation is different, I guess.

Seg, I'll give you a diffent answer, and let me preface that by saying I was a private banker for many years and did quite a bit of financial couseling. My goal was to help my clients get richer, so I'm answering with that in mind.

The cost to borrow money right now is quite good. Factor into that the tax deduction on interest, and you have a very good borrowers market. If your financial position is secure (ie jobs in place, etc) I would advise you refi your house (rates are in the low 6's for a 30 year fixed) and take some cash out of it in that refi to pay for the remodel. Your LTV Is so low it should be a quick refi, most likely even done using a tax assessment, verses paying for an appraisal (about $500). Banks are hungry right now and there are some good deals out there, ie no fees etc.

I'd keep your cash on hand in a safe investment. It is a challenging environment and having cash in the bank is always a good idea.

People say "you can always borrow later if you need to" but that's not necessarily true. Many people's HELOC's have been yanked due to significant market fluxuation. In addition, borrowing when you have no job to pay back the loan with is not possible, or could be done at very high rates. Accessing equity if your life has gone south is actually quite hard to do. Credit is ALWAYS easier to get when you don't need it :)

If you factor in the tax deduction, the low rates on 1st mortgages now, and then subtract the return on your cash investment, you'll most likely find that borrowing is only going to cost you a couple percent at the most.

Personaly that's what I'd do, and what I'd advise my clients to do at this point.

I am almost finished with a huge (over two year total gut remodel of our home) remodel, and we actually did a mix of both borrowing on equity (and that was future value equity based on the remodel scope). We borrowed enough to stay below 70% LTV (loan to value) so we'd be able to wrap that when we are finished into a low rate fixed mortgage. But our remodel actually cost quite a bit more than our equity (we are doing this for us, not anyone else, and we don't care about losing the money if we chose to sell). So we also paid cash for a few hundred thou of it.

If you have a low DTI (debt to income) ratio for all of your debt (not just the mortgage) and borrowing won't stretch that beyond a very conservative 25%, borrowing makes much more sense. Just be reasonable about the value of what you're doing...if it's for resale, than keep within maket guidelines for your neighborhood and home type, or if like us, you're doing it for you....and it won't put you into a bad debt position, do what you want :) but hang onto that cash!

Thanks, igloochic. I'm certainly no financial expert, at ALL, but that was what my gut told me. Problem is, I'm never sure when I can trust my gut on $$ issues. ;-)

Seg, I'm glad your financial adviser and I agree :) That person probably knows a lot more about your true financial position than I do. :o) But I'd ask you to check one thing...what rate will the HELOC be at, and is that fixed? Compare that to a cash out refi on your first mortgage the cost as well as the rate) and make sure it's the best choice (cheapest credit). Some HELOC's allow a fixed rate loan, but most are variable at a minimum monthly, and since they're 2nd mortgages verses 1st, their rate is typically a few percent higher, even for a well qualified client. This is why we took a cash out refi on ours. In the long run, it was cheaper. But you do have to factor in the current rate on your 1st mortgage.

We have a HELOC already that is a fixed rate at 5 something percent ... Our first mortgage is 6 something. I'd have to look it all up ... but we refi'd a few years back when things were quite low.

Would they just increase the ceiling on the current line (it isn't very much, maybe $25K)? Well, obviously you don't know specifics: what I mean is, Is that ever done? That would be great, because it's so low. I don't even know what rates are now, because I haven't thought about needing to take out a loan in a while.

Guess I'll go research. :-)