Should I get a loan for remodeling home or pay outright if we have the money?

[Htakhanna]

My husband and I are trying to add a bathroom and turn our carport into a garage. I think it'll cost about 40k. We have enough money in our savings account with plenty of money left over for our emergency fund. Should we get a loan or pay from our savings?

We were also looking into doing other renovations but it would cost another 30-50k. At what point should we look into getting a loan vs. spending our savings? I wouldn't want to use the full 90k out of our savings if we ended up doing the bigger project in case something happened.

Thanks!

[LivingAlmostLarge]

It's up to you. Are you planning on doing renovations in one fell swoop? In stages? Pay as you go? How long to save up and pay as you go? How much of $90k is the EF?

We're doing a renovation that started at $60k and we're up to $75k. Cash out of pocket. Budgeted $75k but I'm hoping to stay under $100k. I still wouldn't cash out equity though. I hate the idea. But if you are doing all this work in stages then maybe you can take some from savings and cash flow the rest.

Further how long are you looking at renovating? We were supposed to be 3 months. It's been 4 so far and I hope another month. So due to circumstances we are able to cash flow and pay more OOP.

[bjl584]

At some point it may make sense to start looking for a new house. But that depends on how long you plan to stay in your current home.

I'd probably pay cash for phase 1 since you have the money.
Phase 2 may be pushed off a bit until I have more cash reserves.

I'm not opposed to financing remodeling projects, but I don't have enough info about your overall financial picture to give you a better answer.

[snafu]

While I understand your desire to add a bathrm and garage, it's important to research the value these and improvements being considered later, adds to your property. It's rarely in your best interest to be the most expensive house on the street.

Have you had experience with a remodel? As LAL mentions, it's generally more expensive and takes longer than planned as unanticipated problems can lurk unseen behind existing walls. I know from experience that staying in a house during renovation can be very unpleasant with workmen coming and going, dirt appearing in spite of plastic barriers, and general aggravation of delays from dozens of circumstances.

What do you see as benefit from borrowing money to pay for renovations? I too would cash flow renovations, paying in 1/3 increments as work is completed based on a figure of 80%. The final 20% paid after 30 days when no problems have arisen.

If your contractor needs payment up front to pay for supplies, I've found it effective [but inconvenient] to meet at outlet and pay for supplies for my project. I learned that contractors in our area get a 20% discount from suppliers which is not passed down to client. I was really annoyed when I realized that contractors buy supplies for other clients since it's convenient, and 'forget' to deduct that sum from the bill when they tote your bill.

I hope you'll take the time to carefully, thoroughly vet your contractor via BBB, checking with their references, asking your bank to check his financial/credit authenticity. Do not sign anything without reading every word and understanding implications. There are so many scams these days.

[rennigade]

I personally never think its a good idea to take a loan for renovations. Unless its a roof where water is leaking and could cause a world of damage...dont do it. If you dont have the money dont borrow.

In your case you do have the money...pay for it in cash/check.

If anyone tells you how much better you can do in the stock market this year with all that cash...ask them what the stock market is going to do in 2018...better yet have them sign a document stating they will reimburse you if you lose money.

[Fishindude77]

I would pay cash.
If you like where you live it’s money well spent.