What's better; Home equity loan or HELOC?

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Wanting to pay off a couple of credit cards and do some home improvement this Summer.

Home is worth $155k, I owe $94k. Need around $18k to do the bathroom, new shed, new floors, and pay off credit cards.

Current loan is through a title company and with my dad. He gets 5.5%.

Planning on talking to him before I do anything. He may just re-fi the loan and give me the cash.

Looked online at different products and did not like what I saw. Looks like interest rates around 9% on Helocs and over 6% on re-fi.

Just looking for opinions on the options. Looking to get the house fixed up and sold so I can beat feet to Idaho. Doing the bathroom and floors and outbuilding would add at least $15k to the value.
 

AMT

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Not sure who you bank through but my HELOC is at 5.5%. And is a tax write off. Where through your dad is the same rate and no tax write off.

Good question about putting more $$$ in than you'll get out of it. Doesn't make good money sense.

At those rate you are paying, I'd be shopping around for a different bank. Better yet, shop around for a good credit Union.
 

66PonyCar

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Home equity loan has a fixed rate and fixed term. HELOC generally has a 10 year draw period, floating interest rate, and usually a 20 year payback after the draw period ends. On a HELOC you can choose to convert a portion of the loan to a fixed rate and term at any time before the draw period ends. A HELOC allows you to pay interest only until the draw period ends. And no, I would not recommend paying interest only until the draw period ends.

The high interest rate quoted to you could be due to several things:

1. Low credit score
2. High debt to equity ratio on the house after the loan
3. You're not shopping at the right lender.
 
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You are at about a 40% equity position right now. Not bad really on a low price point property. You borrow 18K against it and you lose 14% right away. And after a lifetime of general contracting, there is no way you get it all done for 18K. It will cost you at least $ 2,000 more, and who knows after you open things up.

Sell it as is at that stated value and with your liability on it you put the 18K in your pocket and not paying interest on a fairly low value loan. There will be loan origination fees and some other things required, maybe appraisal, and all that. The institutions make money on these fees, not the straight up interest only.
 
OP
P
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And don't ever, ever, ever go online and use Lending Tree to get an idea of interest rates and payments.

Neither of the credit unions I use advertise anything other than conventional mortgages or re-fis. Thought I'd try lending tree for a rough idea of rates and payments.

Within 30 seconds of completing the form, which required a phone number, and then them listing maybe 3-4 lenders that would work with me (and only one gave me an actual rate of 6.8%) my cell phone blew up.

For the next several hours, my phone rang every five minutes, dozens of text messages, and 72 emails.

I think I have around 15 voicemails. It was a nightmare, lol.
 
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I recently read that home improvements for the purpose of resale rarely work out as planned; that said, improvements made to increase YOUR enjoyment of the home almost always work well.

IMO, sell it as is and run with what you can get. Less money in your pocket, but also less liability and hassle.
 
OP
P
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I recently read that home improvements for the purpose of resale rarely work out as planned; that said, improvements made to increase YOUR enjoyment of the home almost always work well.

IMO, sell it as is and run with what you can get. Less money in your pocket, but also less liability and hassle.
The bathroom is so bad, that I don't think I can sell the house as is. It's tiny. 5' x 5'. Only bathroom in the house. And it's done in 70's theme with the puke yellow tub.

Floors in the kitchen and main room are 70's vinyl.

Planning on doubling the size of the bathroom by knocking out a wall and decreasing laundry room size. Bathroom will be gutted and a double sink vanity added along with tile floors, new tub/shower, new fixtures, new sheetrock, etc.

But, since it's the only bathroom in the house, I have to live somewhere else while I do the work. So I need all the cash for the work up front so I'm not homeless for more than a couple weeks or so.
 
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The bathroom is so bad, that I don't think I can sell the house as is. It's tiny. 5' x 5'. Only bathroom in the house. And it's done in 70's theme with the puke yellow tub.

Floors in the kitchen and main room are 70's vinyl.

Planning on doubling the size of the bathroom by knocking out a wall and decreasing laundry room size. Bathroom will be gutted and a double sink vanity added along with tile floors, new tub/shower, new fixtures, new sheetrock, etc.

But, since it's the only bathroom in the house, I have to live somewhere else while I do the work. So I need all the cash for the work up front so I'm not homeless for more than a couple weeks or so.
That sounds like you’ve got your work cut out for ya! I can see why you’re wanting to remodel before selling...lol. If you can do it on a budget (inexpensive rather than cheap) you’ll probably be ahead when you unload it. Good luck!
 
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Not aware of current rates, however, the major benefit of HELOC as opposed to refinance is that you can borrow, pay off as quickly as you would like, and if necessary, borrow again.

Put the numbers into a calculator online and determine how much it will cost you to do either after interest and any additional fees. If closing costs are added to the refinance, depending on how long you carried the balance, that alone would make that route less financially prudent.
 
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Fixing up a house before sale is not just about value after the upgrades. It is about sell-ability. There are so many buyers who have no imagination and/or no desire at all to do repairs. Performing the repairs before sale, even if the value increase is close to a wash, is almost always a benefit.

Now, don't forget that getting a loan, or refi-ing, have very real costs! $$Thousands$$ And many of the costs are fixed, even when you are borrowing such a small amount.

What about simply using a credit card? I only make this suggestion because you are selling right away. It is a little tough to pay contractors, but you could work it out. The higher interest, over the short time period, far outweighs the costs of a loan.
 
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Fixing up a house before sale is not just about value after the upgrades. It is about sell-ability. There are so many buyers who have no imagination and/or no desire at all to do repairs. Performing the repairs before sale, even if the value increase is close to a wash, is almost always a benefit.
Exactly. We just put about 100K into our house. Took it out of invesment accounts, had to pay taxes and all. But....we have lived in the house 30 years. Raised 5 kids. Did NOTHING to it over that time. It was trashed. I was paying 40% of my income in child support. My wife got no child support for her 2 kids. No money for anything.

We took a lot of sh*t from people, including our brilliant millennial kids for putting that much money into the property. They said just sell it and move on. Right. For a lot less than it had the potential to be worth. It is a gem right now. Been on the market for 15 days, 8 showings no offers yet, but the price point is 585 right now, so they move slower than the 300K stuff does.

We will get the 100K back, since our mortgage is about $ 180K left. We will build a new house and shop on land we all ready own and are free and clear, and will probably have 50K left over. Now tell me how that did not work out ??

If we had done nothing and sold, we would be looking at a lot less to work with for our new place.
 

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