Where to get $100k for home remodel?

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High Income Parent
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Where to get $100k for home remodel?

Post by High Income Parent » Fri Jan 20, 2017 9:43 am

I would love some advice about this particular scenario:

Say you have a big expense, in this case a home remodel and after exhausting all cash reserves you still need $100k.

The options are:

1. Sell $100k worth of stock in a taxable account initiating a long term capital gain of probably 20-30k in the 20% capital gains tax bracket (I should have enough in losses from TLH to counteract this)

2. Get a home equity loan at around 4% but have the added expenses of appraisal and bank fees

3. Take a margin loan against the taxable account at around 7% interest and hope to pay the taxable account back over the next 18 months and hope for no extreme market downturn that would result in a margin call (taxable account has around $350k)

4. Try to get a bunch of credit cards with no interest for 18+ months and pay those off over the next 18 months. (Probably not possible and labor intensive)

5. Delay remodel until the rest of the cash can be raised (unpopular decision with the Mrs)


6. Something else I haven't thought of?

I wasn't sure if this was consumer finance or personal finance but I appreciate any feedback you all have.
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livesoft
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Re: Where to get $100k for home remodel?

Post by livesoft » Fri Jan 20, 2017 9:45 am

Why not do all of them? Then you can tell us next year which turned out to be the best way?


When I was doing the 0%-interest no-fee credit card cash advances, it was the opposite of labor intensive. I set up minimum monthly payment in online bill-pay and a lump-sum payoff at the end before any interest was charged. Can you explain please why you think it would be labor intensive?
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bloom2708
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Re: Where to get $100k for home remodel?

Post by bloom2708 » Fri Jan 20, 2017 9:57 am

1 or 5

You owe the tax on the capital gains whether you do the remodel or not. If you sell 10 years from now, the gain will likely still be there in some form. Paying for the remodel seems the best way to make it real.

I would consider scaling back the remodel if paying for it makes you uncomfortable. Not sure what the remodel is, but most upgrades function very close to the previous versions. Granite counter tops hold plates and cups as do formica. Stainless steel gas appliances cook food similarly to white electric appliances.

I envision some day talking to a realtor and saying I would like a house that is small, not open concept. I would like carpet throughout and linoleum in the kitchen. Formica countertops are a must along with white electric appliances. 2 car garage. No way do I want 3 stalls. No master bath is fine. Just regular closets as I don't need so much stuff anyway. :o Every style that is new/hip right now will be out of style 5-10 years from now. It has to be to keep selling upgrade/remodels.
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Re: Where to get $100k for home remodel?

Post by High Income Parent » Fri Jan 20, 2017 9:59 am

I guess you are right about the credit card thing. I figure I would have to apply for at least 5 credit cards to get a 20k limit each and I didn't even know if there are five cards available with no interest for an extended period of time. I will look into it.
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goingup
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Re: Where to get $100k for home remodel?

Post by goingup » Fri Jan 20, 2017 10:00 am

It's been several years since our remodel but we cash-flowed the improvements, along with a 0 interest Home Depot credit card to purchase fixtures, flooring, etc. Selling long-term gains matched with TLH'd losses looks like a great option too. I'd try to avoid the options which charged interest. :beer

mw1739
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Re: Where to get $100k for home remodel?

Post by mw1739 » Fri Jan 20, 2017 10:18 am

For what it's worth, you should be able to get a HELOC for $0 fees. Shop around a little. I'm in favor of paying cash. When I did a $75k remodel a few years ago, I paid cash and opened a HELOC to have a backup liquidity source.

gotlucky
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Re: Where to get $100k for home remodel?

Post by gotlucky » Fri Jan 20, 2017 10:28 am

goingup wrote:It's been several years since our remodel but we cash-flowed the improvements, along with a 0 interest Home Depot credit card to purchase fixtures, flooring, etc. Selling long-term gains matched with TLH'd losses looks like a great option too. I'd try to avoid the options which charged interest. :beer
This is exactly why tax-loss harvesting is good to do year round. If you never tax-loss harvested over the last, say 15 years, all your positions would have large unrealized gains. However, if you aggressively matched winners and losers every year while adding new funds, you'd likely have some positions with HUGE unrealized gains and some losers or positions trading near their basis. You could now sell the losers and generate tax-free income. Like goingup said, you could match with winners if you needed more funds or you could simply write-off $3k in net losses (if MFJ). That's extra money.

What to do with your huge winners? Give them to your kids to sell, donate them to a DAF, or die. As mentioned, you could also take a margin loan with deductible interest. I've never done a margin loan, but they seem pretty straight-forward with low, if any, origination fees.

adamthesmythe
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Re: Where to get $100k for home remodel?

Post by adamthesmythe » Fri Jan 20, 2017 10:33 am

Decades ago I got a second mortgage for a kitchen remodel. Do they still have second mortgages?

No way would I get a margin loan.

If you can almost but not quite afford it out of cash flow then the zero-interest credit cards might work.

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Hub
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Re: Where to get $100k for home remodel?

Post by Hub » Fri Jan 20, 2017 11:13 am

The HELOC seems simplest to me. I had an easy experience getting mine done with no fees at PenFed.

Another option would be a cash-out refinance of your home, but the odds are your current mortgage interest rate is better than a new one would be.

bubbadog
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Re: Where to get $100k for home remodel?

Post by bubbadog » Fri Jan 20, 2017 11:29 am

Very strong vote for #5.

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Artful Dodger
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Re: Where to get $100k for home remodel?

Post by Artful Dodger » Fri Jan 20, 2017 11:58 am

1. Sell $100k worth of stock in a taxable account initiating a long term capital gain of probably 20-30k in the 20% capital gains tax bracket (I should have enough in losses from TLH to counteract this)

If your losses counteract the gains, go for it. The obvious negative is you're loosing any potential future gains, but then again you won't be faced with paying off a $100K loan.

2. Get a home equity loan at around 4% but have the added expenses of appraisal and bank fees

As others have noted, you should be able to find a HELOC with no fees and who will waive appraisal.


3. Take a margin loan against the taxable account at around 7% interest and hope to pay the taxable account back over the next 18 months and hope for no extreme market downturn that would result in a margin call (taxable account has around $350k)

The last thing I would do.

4. Try to get a bunch of credit cards with no interest for 18+ months and pay those off over the next 18 months. (Probably not possible and labor intensive)

I have done this for short term needs and got the 0% with a 2% upfront charge. I think I would do this if the max needed wasn't available through the HELOC or stock sale.

5. Delay remodel until the rest of the cash can be raised (unpopular decision with the Mrs)

No comment.

6. Something else I haven't thought of?

Maybe a combination of the above. Most jobs will require a small amount down to begin, then partial payments going forward, and final payments at completion. Look for a no closing cost HELOC first, then complete needs with either the security sale or some 0% CC credit.

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hand
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Re: Where to get $100k for home remodel?

Post by hand » Fri Jan 20, 2017 12:14 pm

401(k) loan? Liquidate some Roth (and potentially pay back)?

Potential for misuse is high, and I understand why many are passionately against anyone ever touching retirement assets, but both seem to be reasonable options to me for people who have overfunded / are ahead of the game in their retirement accounts.

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yukonjack
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Re: Where to get $100k for home remodel?

Post by yukonjack » Fri Jan 20, 2017 12:17 pm

I did a remodel slightly bigger than yours about 4 years ago. I ended up going the HELOC route and it couldn't have been easier. No fees and no appraisal. It was really more of a backup as I paid it off within 60 days. Maybe save up half in cash and the remainder in HELOC.

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Toons
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Re: Where to get $100k for home remodel?

Post by Toons » Fri Jan 20, 2017 1:25 pm

Delay,,and
Save. :D
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multiham
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Re: Where to get $100k for home remodel?

Post by multiham » Fri Jan 20, 2017 1:49 pm

gaspony wrote:
The options are:

1. Sell $100k worth of stock in a taxable account initiating a long term capital gain of probably 20-30k in the 20% capital gains tax bracket (I should have enough in losses from TLH to counteract this)

2. Get a home equity loan at around 4% but have the added expenses of appraisal and bank fees

4. Try to get a bunch of credit cards with no interest for 18+ months and pay those off over the next 18 months. (Probably not possible and labor intensive)
I like option 1 or 2 the best. The only way I would delay is if you had a very short time frame to save the necessary $ to pay cash. "Happy Wife, Happy Life" is a guiding principle for me and my wife feels the same way about things that are important to me.

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Re: Where to get $100k for home remodel?

Post by Sandtrap » Fri Jan 20, 2017 2:24 pm

Modified #5.

Do a little bit at at time as funds come in. Shows progress. Keeps everyone happy.
Home Depot/Lowes trips every week. Harbor Freight trips interspersed.
Family fun:
Board here, tile there, few door locksets, new drill. . . . .

inbox788
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Re: Where to get $100k for home remodel?

Post by inbox788 » Fri Jan 20, 2017 6:48 pm

gaspony wrote:3. Take a margin loan against the taxable account at around 7% interest and hope to pay the taxable account back over the next 18 months and hope for no extreme market downturn that would result in a margin call (taxable account has around $350k)
Open a margin account at Interactive Brokers and pay a much lower rate!
https://www.interactivebrokers.com/en/index.php?f=1340

noco-hawkeye
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Re: Where to get $100k for home remodel?

Post by noco-hawkeye » Fri Jan 20, 2017 7:19 pm

Am I reading between the lines - you could save 100k within an 18 month period? 18 months seems like not that long to wait, if so.

I'd say try to save up for a bit, and take a heloc for any remaining amount. So maybe pay it something like 50/50 for out of pocket saving and a heloc?

At the beginning of a project like this, it's easy to assume that certain things will turn out well / according to plan. I would want to pay more out of pocket and be ready for the inevitable "surprises" that come along with projects like this.

Good luck!

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Re: Where to get $100k for home remodel?

Post by expat » Fri Jan 20, 2017 7:26 pm

'Buy a better house.

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TheTimeLord
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Re: Where to get $100k for home remodel?

Post by TheTimeLord » Fri Jan 20, 2017 7:33 pm

My vote would be #6. List it and build the house you want, which I assume means you will need to get a mortgage but the improvements will likely cost a lot less than a remodel.
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Re: Where to get $100k for home remodel?

Post by hudson » Fri Jan 20, 2017 7:55 pm

If I were in your shoes...and I have been, I would not borrow any money to do the upgrade.
I think staying out of debt is good.
Maybe say, "We can't afford it until we save up."
Cash N Carry is good.
Having no debt gives one more freedom...more options.

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SurfCityBill
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Re: Where to get $100k for home remodel?

Post by SurfCityBill » Fri Jan 20, 2017 9:03 pm

PenFed Credit Union offers attractive HEL. 3.74% 5 year if you're 80% or less LTV. My out of pocket 4 years ago was zero. No appraisal, no closing costs. I think I was on the hook for a $10 notary charge.

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Watty
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Re: Where to get $100k for home remodel?

Post by Watty » Sat Jan 21, 2017 12:18 am

If the project is expected to cost $100K then you should have a lot more financing than that lined up since the remodel could easily go significantly over budget or take longer than expected.

gaspony wrote:6. Something else I haven't thought of?
Buy a different home that does not need to be remodeled. You could buy a house that costs $100K more than your current house with a normal mortgage that is $100K larger.

That would also save having to live somewhere else while the work is being done or even worse live in a construction zone.

You will also likely have to make a lot of compromises on fitting the improvements into an existing building.

If you have kids and the remodeling project takes a year to plan, schedule, and do, then that could be a significant amount of the time the kids will be living in the house before they go off to college. For example if you have a middle school kid that will graduate in five years then they may only be able to live in the remodeled house for four years before they leave for college.

It would be good to get a real estate agents opinion on just how much value it would add to your house, usually it is a small percentage of what the project would cost.

Buying a different house would also be a lot less stressful. There is an old joke that has a grain of truth in it that says, "The final step in a large remodeling project is to file for divorce."

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Re: Where to get $100k for home remodel?

Post by High Income Parent » Sat Jan 21, 2017 9:54 pm

I looked everywhere for a home that has the same proximity to work and school, amount of land and layout and updates that we want. There is nothing even close to what we have even with the remodel cost factored in.

I will look into he HELOC and cash in some equities if need be since we have the TLH losses to counteract the capital gains.

I agree that delaying another year or so to just have all the cash on hand is best but we have more than enough in the taxable account to cover the remodel. We just lose the growth potential in the investments, but we lose that either way. The only advantage to waiting is to not have to sell the current investments.

The contractor projects three months, we all know how that goes but this guy does have an amazing track record with lots of great references so I don't think he will be much off.

Moving out of the house to complete the remodel is a pain but with a large family you all know how clutter can accumulate and it will be an excellent opportunity to clear out some junk and donate some thing we haven't used so I'm half way looking forward to going through everything and getting rid of the clutter.

We estimate that we have at least 12 more years before we would even think of moving (of course things can change) so that seems like a reasonable time frame to enjoy an updated house and increase the value of the home.

Thanks to all for the great advice. I appreciate everyones experiences and preferences.
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Pajamas
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Re: Where to get $100k for home remodel?

Post by Pajamas » Sat Jan 21, 2017 10:02 pm

If you want to borrow money, you could also transfer your brokerage account to a broker that offers a lower margin rate. You can easily borrow money right now for under 3% and some brokers are offering under 2%. The rate will usually increase as your balance goes down, but it would still be lower than the other options you listed.

Best option would be to wait until you have the money, though. Eighteen months is not long for something that costs $100,000.

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money

Post by daveatca » Sat Jan 21, 2017 10:04 pm

#6
Follow Willie Sutton's advice and path.

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Re: Where to get $100k for home remodel?

Post by aj44 » Sun Jan 22, 2017 9:41 am

#5 if everything in the home is still functional.

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Re: Where to get $100k for home remodel?

Post by finite_difference » Sun Jan 22, 2017 11:15 am

As long as you are overall LBYM I would just do #1 -- sell stocks in taxable to pay for it.
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Re: Where to get $100k for home remodel?

Post by Dottie57 » Sun Jan 22, 2017 11:25 am

hudson wrote:If I were in your shoes...and I have been, I would not borrow any money to do the upgrade.
I think staying out of debt is good.
Maybe say, "We can't afford it until we save up."
Cash N Carry is good.

Having no debt gives one more freedom...more options.
+1

stevekozak2
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Re: Where to get $100k for home remodel?

Post by stevekozak2 » Sun Jan 22, 2017 11:57 am

#5. If the wife gripes, tell her to get another job to speed up the process. Don't buy things you cannot afford.

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Re: Where to get $100k for home remodel?

Post by Scotttheking » Sun Jan 22, 2017 5:27 pm

HELOC

saver007
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Re: Where to get $100k for home remodel?

Post by saver007 » Sun Jan 22, 2017 7:25 pm

inbox788 wrote:
gaspony wrote:3. Take a margin loan against the taxable account at around 7% interest and hope to pay the taxable account back over the next 18 months and hope for no extreme market downturn that would result in a margin call (taxable account has around $350k)
Open a margin account at Interactive Brokers and pay a much lower rate!
https://www.interactivebrokers.com/en/index.php?f=1340
+1 IB's margin interest rate is still less than s&p 500 divided yield. So your dividends most likely will pay for the interest and margin interest expense is technically tax deductible. If you open portfolio margin account, generally speaking you can take loan UpTo 85 percent of value of your portfolio . So you have ample room before a margin call/liquidation for taking 100k from a 350k portfolio.
But do know IB's margin interest rate is floating..So rate will go up along with feds hikes and vice versa

Willard
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Re: Where to get $100k for home remodel?

Post by Willard » Sun Jan 22, 2017 7:30 pm

Dont do a heloc whatever you do also If you use credit card make sure you get reward cash back offer

But the best options is to wait

If you have to do a heloc get a fixed rate please

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Re: Where to get $100k for home remodel?

Post by rcjchicity » Sun Jan 22, 2017 10:14 pm

I would recommend going with a non-loan option - #1 or 5.

We just finished a $100k+ remodel of our house and paid cash. We lived in the house during the remodel - and we have a toddler and an infant! Still have a bit of PTSD around the process, but am happy that we have no more bills to pay toward it.

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Re: Where to get $100k for home remodel?

Post by awval999 » Mon Jan 23, 2017 7:58 am

It's laughable that people think you cannot "afford" the remodel because the money is in taxable, whereas if it was in a savings account they wouldn't see it as a problem.

As long as you are "on track" for retirement there's nothing wrong with overstuffing taxable and then removing that overstuffing when the time comes for something like this.

Sell the taxable stocks. Pay for the remodel.

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