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Home > Should I take money out of my house?
 

Should I take money out of my house?

October 24th, 2008 at 05:38 pm



I plan to finish some remodeling projects in my house in 2009. Namely the master and guest bathrooms, the kitchen countertops/lighting and putting in new carpet or possibly hardwood floors.

I received about 5K towards these updates from the previous owner when I bought in 2003, but I chose to invest it at the time and not use it for renovation. I just recently got married, and I see myself selling this home in the next two years, so that we can possibly purchase something together. I'd need to finish these outstanding projects before I can put the house on the market.

Since we are living on one income I have the option to save and pay for these projects in cash. I bought it in 2003, and if I were to sell it now, I'd probably get the same price that I bought it for. 5 years and it's been a totally lousy non-investment! So I'm considering getting a HELOC because I really hate to tie up even more cash in this home.

I guess I am thinking worst case scenario. If the house market tanks hard, and continues to do so, I would just stop payments and short-sale, or deed-in-lieu-of it along with all the repercussions that would go along with doing that. They predict that Denver home prices will fall about 10% next year, and if there are no govmt programs in place to help people to redo their loans when the homes appraise for way less, I think this trend will continue for years to come.

I know this is crazy, fatalistic thinking, but when companies walk away from their commitments left and right without even a slap on the wrist, I wonder why the consumers can't either.

Sure the housing market will rebound, somewhat, someday. But how long will that take 5, 10 years? I hate to put my life on hold for that long.

This was the article I read this morning that made me think about the whole thing:

Many Consider Foreclosure as Home Values Drop

8 Responses to “Should I take money out of my house?”

  1. baselle Says:

    Frankly, I think the point is moot. I suspect that you won't be able to get a HELOC at this point in time.

  2. Caoineag Says:

    I'm with baselle, I doubt you can get a HELOC. As to the Denver market, you do know Denver was declared a stable market(instead of a declining market) about a month ago don't you? I am not sure where you are getting the 10% drop in the next year unless your home is in the 300k+ category (200k and lower is supposed to be stable and start going up next year).

    FYI, http://www.denverpost.com/economy/ci_10771000

    I happen to agree, before I could even put bids in on certain houses 3 of my top 5 were sold (not under contract, went from available to sold). The current house I have under contract is because its a short sale and the previous buyers lost downpayment assistance so cancelled their bid.

    That said, if you paid too much, then obviously you won't get a lot of money out of it. But unless you are in the upper brackets, you really shouldn't lose anymore value.

  3. baselle Says:

    And another consideration - if you get a HELOC, then foreclose, and it can be proven that you had an intent to defraud, you could be in very bad trouble ... much worse than credit score hit/bankrupcy trouble. The blog post above could be evidence enough and used against you.

  4. thriftorama Says:

    I would just do cosmetic inexpensive updates a la Designed to Sell unless you are planning to stay. No sense spending money you can't get back. It's also amazing what some paint can do.

  5. PauletteGoddard Says:

    According to the mailers I received this week, some local banks and credit unions are still offering HELOCs, maybe at 65% LTV or based on very conservative appraisals of houses. Although we live in different metropolitan statistical areas.

    I acknowledge my view is controversial in today's economic condition. I too could save up for my projects in cash -- I actually did for the bathroom and windows, and am financing half of the kitchen. Like you, I'm doing these projects with an eye of resale within two years. Do you have a decent amount of equity after five years of homeownership? Would you still have a safe (30%< ) level of equity after financing the remodels? How would the remodels affect your house's resale value?

  6. MileHighGirl Says:

    I can still get a HELOC in Denver through my bank or credit union, no problem. I have about 30% equity in my home.

    I could probably get about 80% of the remodel expenses out, but the house will be on the market longer since it wouldn't be priced any less than my competition.

    I like that people are out there describing markets as stable or unstable. What does that really mean to me? This is a huge city and each suburb is completely different. Plus the homes that are selling fast are cheap ones. The average home prices in my neighborhood are 350/400K, although mine is closer to 250K, and they are sitting on the market for a long time.

  7. PauletteGoddard Says:

    This is a huge city and each suburb is completely different. Plus the homes that are selling fast are cheap ones.
    We're singing the same tune. Also, chances are good that should you get a HELOC (doesn't have to be a big one), you'll get a rate that's close to what your mortgage rate is (unless you have a teaser) after October 29. What's the harm in applying?

  8. piglet Says:

    Well my boyfriend and i just bough a house in Oakley CA about 3 mnoths ago, it needs a lot of work done to it, but cant get anyone to give us a loan... Anyone know what we should do?

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