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My finances have mostly been left to their own devices since my last post, back in December. I simply have not had the energy or time to worry about anything more than paying the bills. Tonight, however, a combination of free time and a financial question finally motivated me to do it.

And WOOHOO, there is a happy dance to be done!!!! Tonight I scheduled the final payment to pay off the family loan that has been building DD’s 529 account for the last 9 years. It will post tomorrow, but I’m claiming it now.

And another reason for a happy dance: I’ve made it to more than $100k in debt paid off since I started working on this back in 2006. All that remains now is my mortgage. (See below for thoughts there…)

Here are the numbers:

				5/31/2006	12/30/2011	
401(k) Loan: $29,173 Paid in full
Family loan/college fund $32,965 Paid in full
Family loan/car ($5k in 2008) $ 0 Paid in full
Total Non-Mortgage: $62,138 $ 0

Mortgage: $283,306 $ 243,903
Total all debt: $345,444 $ 243,903

Total paid: $101,541


On to the reason for the update in the first place. Because of the storm damage, additions to the house that I thought could wait a few years have become more urgent, and are going to be more extensive than I thought. Insurance will pay a fairly small part of the total, because what I want to do fixes poor construction that was there to begin with as well as the damage the storm did. The rough estimate that I have is that it’s about 1,000 square feet (a combination of added and completely rebuilt space). At $200 per square foot (the going rate around here) plus architects’ fees, that’s $225,000.

That’s a lot of money. If I look at the amount I’ve paid off in the last 6 years, I can figure I could pay it off in about 12 years. But that’s 12 years of money that doesn’t go toward retirement, DD’s college fund, vacations, parties, and pedicures. (I’ve never had a pedicure. But a girl can dream…)

There are good reasons to do it. DH will finally move to my house sometime in the next three years. He will be moving from a 4-bedroom home on 2 ½ acres, and while he’s resigned to leaving the riding mower behind, he would like to have a place for the LaZBoy, the flat-screen TV, his 4-poster bed and his clothes. All those will be tough in my current space.

The insurance will probably cover 10% of the total cost of the addition. I have savings that will cover another 10%, though that would dip into the e-fund some. When DH sells his house, he will hopefully net another decent fraction of that, but probably less than half of what I’m thinking about. And that’s future money, not available-now money.

This is something that, on some level at some time, will have to be done anyway. Construction problems don’t heal themselves. So the question is, how to finance this work, and whether to do it now as part of the storm damage repairs, or do the repairs separately.

I have not even come close to deciding, and independent wealth still escapes me. Ah, well. Onward!

ThyPeace, really likes the idea of independent wealth, but squandered her youth on science instead of building it.
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Congrats on your debt payoff--well done.

As for remodeling...I guess you won;t be any worse off financially since your husband will presumably replace his current mortgage with your new one??

Loan rates are very low right now, so a new or second mortgage seems cost-effective. I'd take a 30-year fixed but try to payoff in 15 years (I'm one of those who would HATE to have a mortgage in retirement, but then we don't have the cash flow or investing expertise of many on TMF).

Are you/hubby handy enough/have enough time to do some of the work yourselves, such as interior finishing? Friends who finished the interior of a vacation cottage (a new prefab assembled on site) using supplies from Habitat for Humanity--apparently they get way more donations of materials than they can use, and lightly used wood flooring from a local incomplete building project (they had to pry it up and move it, but it was incredibly cheap). It took a few years to get everything done as they paid cash as they went, but the results were stunning. When they had to move for a job, they got top dollar in 2010. Nothing wrong with second-hand, overstock, or lower-end materials if chosen carefully.
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I’ve made it to more than $100k in debt paid off since I started working on this back in 2006.

That's amazing. Congratulations!
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This is something that, on some level at some time, will have to be done anyway. Construction problems don’t heal themselves. So the question is, how to finance this work, and whether to do it now as part of the storm damage repairs, or do the repairs separately.

I guess one of the things that I would try to figure out before making the 'now or later' decision is - If the bare minimum is done now, how much of that work will get torn back out when you go do the later changes? If you're going to have to tear most of it out, then that would argue for doing everything now. If you can put some changes in now, and build onto those later without a lot of rework, then you might want to do the project in a few steps. That will allow you time to save up more of the money.

As far as how to pay for it - If you don't feel like you are going to be able to save up enough money to get what you want to get done by the time you will need to pay for it, you're going to have to borrow. If you can get cash out of your house now/with minimum repairs, it's a great time to borrow. You don't have to spend all of that money right away if you are doing the project in steps. It will probably mean that you will have a larger mortgage payment than you currently do. On the other hand, you will have a starting balance to put toward the rest of the project. Of course, if you think that the rates will stay low for a while longer, you could always wait to borrow, costing you less in interest.

AJ
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Um,I don't know how much your house costs, but it sounds like you're talking about doubling what you owe on it--have you run the numbers on a minimal fix, selling the house, and buying one that has the space for you and your DH?

It might make perfect sense to do it now, and as completely as you're planning. I'm just wondering if it makes sense in the larger context of "fix it to the level insurance will pay for, sell house, buy new house that already has the extra space." Not to mention, you could wait and do that when your DH is actually going to move out, rather than maybe three years ahead of time.


--Booa
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Also, great job on the debt payoff! :-) Well done, you're an inspiration.


--Booa
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Thanks for the thoughts, everyone. They are much appreciated. A few answers to various specific suggestions and thoughts:

As for remodeling...I guess you won;t be any worse off financially since your husband will presumably replace his current mortgage with your new one??

DH lives in a much lower-cost area than I do. (My equity would buy a farm in his area, with a nice house on it. His equity will not even pay for the modest renovation I want to do on my house.) When he sells his house, assuming he finds an equivalent job in my area to what he has now, we will have income and equity enough to pay for the additional debt. Which is not to say that I want to have that debt. Just that we could do it if we had to.

In addition, DH is 52 and I'm 44. Although I can see myself taking a longer-term mortgage, I don't think it's wise to do that when you're in your 50s. In other words, I agree. Retiring with a mortgage is a bad idea.

Are you/hubby handy enough/have enough time to do some of the work yourselves, such as interior finishing?

I wish I could say yes to this. But honestly... no. We're not. I don't have the skill to do it, and DH lives in another state -- he's not here enough to make any progress on it.

If the bare minimum is done now, how much of that work will get torn back out when you go do the later changes?

Almost all of it. Most of the damage is on four roof surfaces and the walls of an older addition that needs to be torn down and started over. The addition and three of those roof surfaces would be removed when we do the remodel. I have already started the effort to get permanent repairs to the fourth roof done. Temporary repairs actually got done yesterday -- the roofs had started to leak significantly, so I finally got someone to expedite something for once.

Which reminds me, if anyone knows what a bizarre oily substance might be, let me know. I found it in a closet where water came in. There was a bag of ice melt in there, but it's just sodium and calcium chloride -- don't know how that would mix with water to make an oily liquid.

If you can get cash out of your house now/with minimum repairs, it's a great time to borrow.

The house is worth about $800k. (More about that below.) If I increase the mortgage to $440k, I'll still have nearly 50% equity in the house, and the new amount would be within the traditional guidelines for income as well. But still more than I want to pay by far.

Um,I don't know how much your house costs, but it sounds like you're talking about doubling what you owe on it--have you run the numbers on a minimal fix, selling the house, and buying one that has the space for you and your DH?

That's a good question. The house is currently worth about $800k, as I said before. Before anyone gets any ideas, it's not a mansion. It's a 3 bedroom, 3 bath modest Colonial on 0.125 acres of land. In my zip code, it is an extremely modest home.

The remodel would add a master bath and bedroom, and make another bedroom slightly larger. It would also repair the bad construction, as I said, which would make the sunroom into an actual usable room instead of one I try to insulate the rest of the house from. I did a quick search to see what there is in the way of 4 bedroom houses in my zip code. There are about a dozen on the market right now. The majority are $1.2 million and up. The ones that are lower are all on busy streets or in neighborhoods that are "iffy." So it appears to me to be the better investment to remodel this house than to try to buy another. There is also the fact that I can walk to work from here, which I would not be able to do with a move. That's worth a lot to me.

So, all this said, I am downsizing my current estimate of what really ought to be done. There are two parts to the addition I would like to do, and only one of them involves the parts of the house that were damaged. So I am instantly cutting the work in half by removing the other area from consideration for them moment. With that and scraping together all the cash I have that's not working for me hard enough (low-rate CDs, cash that's making zero interest and is not part of the e-fund or f-funds), I could bring the added debt down to maybe $60k to $70k. I'm also working on arranging another meeting with an architect. We'll see what they come up with in terms of costs.

ThyPeace, kind of misses small-town prices for things like houses. But left her last small town 22 years ago and hasn't found her way back yet.
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Well, it sounds like you're in a good house, in a good situation, and being able to walk to work is pretty darn awesome. :-) I'm glad to hear you're also looking at cutting back on how much the current repairs will cost. It sounds to me like you've thought through the situation carefully, and are continuing to think it through carefully. I hope you and the architect can figure something out.

Good luck on getting the added debt down to 60 or 70K. So long as you're not using your efund to pay for it, I could see putting some underperforming funds towards this addition to your house.


--Booa
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