How to pay for a new kitchen and dining room

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CWRadio
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How to pay for a new kitchen and dining room

Post by CWRadio » Wed Jan 10, 2018 9:51 pm

My son called me last night and said he and his wife decided to remodel their kitchen and dinning room. It will cost about $100,000.

His question to me what is the best way to finance the remodeling?

His current house will be payed off in one year.
House is worth about $400,000
He does not have $100,000 in cash.
Has a well funded 401K and IRA.

Any advice would be appreciated. Type of loan, terms, questions to ask, web site, etc or anything else he needs to know.

Since I am the dad he thinks I know everything. That is why I am asking for help.
Thanks Paul

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bottlecap
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Re: How to pay for a new kitchen and dinning room

Post by bottlecap » Wed Jan 10, 2018 9:59 pm

Wow. That’s quite a remodel.

The best way to finance it is to call your Dad, tell him your plans, ask for advice, and hope he offers you a loan at a fantastic rate.

Or he could go with the obvious route and look into a home equity line of credit.

JT

AnimalSpirits
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Re: How to pay for a new kitchen and dinning room

Post by AnimalSpirits » Wed Jan 10, 2018 10:02 pm

Or he could get 3 quotes and hope to cut the price in half. Or sell the house and find a better house for less. 25% of the house value is way too much.

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Watty
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Re: How to pay for a new kitchen and dinning room

Post by Watty » Wed Jan 10, 2018 10:14 pm

AnimalSpirits wrote:
Wed Jan 10, 2018 10:02 pm
Or sell the house and find a better house for less. 25% of the house value is way too much.
+1000


If it is just a remodel and not adding significant square footage putting that much into a $400K house is crazy.

He should talk with some real estate agents to get their opinion of what is appropriate for that neighborhood.

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CWRadio
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Re: How to pay for a new kitchen and dinning room

Post by CWRadio » Wed Jan 10, 2018 10:23 pm

Thanks to all
They looked into selling but the love their house, backyard, neighbor hood, schools and location and unable to find anything available. Real shortage of homes in their area.. Paul

adamthesmythe
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Re: How to pay for a new kitchen and dinning room

Post by adamthesmythe » Wed Jan 10, 2018 10:31 pm

When I did it in my first house I took out a second mortgage.

I never thought of asking Dad, either for advice or in hopes of getting a gift.

123
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Re: How to pay for a new kitchen and dinning room

Post by 123 » Wed Jan 10, 2018 10:32 pm

He might be able to do a "cash out" refinance or get a HELOC.
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JBTX
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Re: How to pay for a new kitchen and dinning room

Post by JBTX » Wed Jan 10, 2018 10:57 pm

This summer, did a remodel - between remodel and new furniture spent about $100k.

Refinanced my mortgage and did cash out for about $70k. 3.25% 15 year. Downside is here in TX refinance fees are in thousands of $$, and my rate went up 0.25%. Upside is I did it with Quicken loans and it is very easy and quick. If I had to do it again I would have cashed out some more for more liquidity.

Also looked at home equity loan on top of my previous mortgage. I think rate would have been around 4.0%. Financially it probably would have been a better deal, but we were ready to get started and I knew the QL would get done expeditiously.

Mortgage is deductible going forward, but only if you have enough to itemize, which he likely won't with that low of a mortgage - unless he has a lot of other itemized deductions. HELOCs are no longer tax deductible.

Seems like a decent article

https://www.homeadvisor.com/article.sho ... 17320.html

Mingus
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Re: How to pay for a new kitchen and dinning room

Post by Mingus » Thu Jan 11, 2018 12:05 am

I can't imagine spending the 25% of the value of a home/land on upgrading one room in the house. Dining room will be a fraction of the cost of the kitchen.

Seems like a foolish use of the banks money.

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FIREchief
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Re: How to pay for a new kitchen and dinning room

Post by FIREchief » Thu Jan 11, 2018 12:18 am

How on earth could it cost $100K to remodel a kitchen and dining room? I'm not sure how you would even remodel a dining room, other than new paint/carpet/furniture. That sounds like about $3K - $4K tops.
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

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Re: How to pay for a new kitchen and dinning room

Post by Mingus » Thu Jan 11, 2018 12:53 am

FIREchief wrote:
Thu Jan 11, 2018 12:18 am
How on earth could it cost $100K to remodel a kitchen and dining room? I'm not sure how you would even remodel a dining room, other than new paint/carpet/furniture. That sounds like about $3K - $4K tops.
20K for cabinets. 10K for solid stone counters. 10K for high end pro-consumer appliances. 5K for plumbing/electrical/sheet rock repair/paint. 5K for high end flooring. And 50K for the contractor.

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FIREchief
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Re: How to pay for a new kitchen and dinning room

Post by FIREchief » Thu Jan 11, 2018 1:05 am

Mingus wrote:
Thu Jan 11, 2018 12:53 am
FIREchief wrote:
Thu Jan 11, 2018 12:18 am
How on earth could it cost $100K to remodel a kitchen and dining room? I'm not sure how you would even remodel a dining room, other than new paint/carpet/furniture. That sounds like about $3K - $4K tops.
20K for cabinets. 10K for solid stone counters. 10K for high end pro-consumer appliances. 5K for plumbing/electrical/sheet rock repair/paint. 5K for high end flooring. And 50K for the contractor.
Got it! Your math checks out!! So is that contractor going to spend six months on this? I would hate to be without my (very humble) kitchen for six months, no matter how it turns out. 8-)

(I think my tract home builder installed my kitchen in about 4 hours and spent around $2K tops :confused )
I am not a lawyer, accountant or financial advisor. Any advice or suggestions that I may provide shall be considered for entertainment purposes only.

AnimalSpirits
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Re: How to pay for a new kitchen and dinning room

Post by AnimalSpirits » Thu Jan 11, 2018 1:10 am

Mingus wrote:
Thu Jan 11, 2018 12:53 am
FIREchief wrote:
Thu Jan 11, 2018 12:18 am
How on earth could it cost $100K to remodel a kitchen and dining room? I'm not sure how you would even remodel a dining room, other than new paint/carpet/furniture. That sounds like about $3K - $4K tops.
20K for cabinets. 10K for solid stone counters. 10K for high end pro-consumer appliances. 5K for plumbing/electrical/sheet rock repair/paint. 5K for high end flooring. And 50K for the contractor.
Around here (large west cost city), the Cabinet maker installs the cabinets, the stone guy the countertops, the electrician the electrical...

What the hell is the "contractor" doing other than cashing a $50k check???

Mingus
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Re: How to pay for a new kitchen and dinning room

Post by Mingus » Thu Jan 11, 2018 1:22 am

AnimalSpirits wrote:
Thu Jan 11, 2018 1:10 am
What the hell is the "contractor" doing other than cashing a $50k check???
Moving some walls around. Ensuring a certain level of construction quality. Acting as the intermediary between the client and the trades. And covering all the details that the work performed by others are not responsible for.

If the layout of the kitchen is staying the same, a contractor is not necessary. Then again, sadly few people in today's world know sequence of events to successfully schedule the trades on their own. Also, there is the huge issue of getting tradesmen to actually show up. Whereas a contractor has relations with tradesmen and knows who does good work and who to avoid. And for 100K, I'd hope the kitchen would look substantially different other than just upgraded finishes.

ThePrince
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Re: How to pay for a new kitchen and dinning room

Post by ThePrince » Thu Jan 11, 2018 1:35 am

Mingus wrote:
Thu Jan 11, 2018 12:05 am
I can't imagine spending the 25% of the value of a home/land on upgrading one room in the house. Dining room will be a fraction of the cost of the kitchen.

Seems like a foolish use of the banks money.
+1

denovo
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Re: How to pay for a new kitchen and dinning room

Post by denovo » Thu Jan 11, 2018 1:38 am

Mingus wrote:
Thu Jan 11, 2018 12:53 am
FIREchief wrote:
Thu Jan 11, 2018 12:18 am
How on earth could it cost $100K to remodel a kitchen and dining room? I'm not sure how you would even remodel a dining room, other than new paint/carpet/furniture. That sounds like about $3K - $4K tops.
20K for cabinets. 10K for solid stone counters. 10K for high end pro-consumer appliances. 5K for plumbing/electrical/sheet rock repair/paint. 5K for high end flooring. And 50K for the contractor.
50 percent margin? :shock:
"Don't trust everything you read on the Internet"- Abraham Lincoln

Mingus
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Re: How to pay for a new kitchen and dinning room

Post by Mingus » Thu Jan 11, 2018 1:43 am

FIREchief wrote:
Thu Jan 11, 2018 1:05 am
So is that contractor going to spend six months on this? )
Probably. Remodeling takes substantially more time and more expense than new construction.

And larger contractors have a lot of overhead to cover as well. There's the estimator. His truck. The office lady. The office. A couple or more guys who work for the contractor. The contractor's wife who drives the Hers Denali. The contractor who drives the His Denali. Their kids piano lessons.

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sergeant
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Re: How to pay for a new kitchen and dinning room

Post by sergeant » Thu Jan 11, 2018 1:57 am

He could take a few years and save the money by limiting other expenses like vacations and eating out. This is a want not a need.
Lincoln 3 EOW!

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CWRadio
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Re: How to pay for a new kitchen and dinning room

Post by CWRadio » Thu Jan 11, 2018 9:39 am

Thank you all for replying to my questions.
I will share your answers with my children. Paul

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mhc
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Re: How to pay for a new kitchen and dinning room

Post by mhc » Thu Jan 11, 2018 10:16 am

sergeant wrote:
Thu Jan 11, 2018 1:57 am
He could take a few years and save the money by limiting other expenses like vacations and eating out. This is a want not a need.
+1

Save up and pay cash. This is a good habit to have.

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Re: How to pay for a new kitchen and dinning room

Post by adamthesmythe » Thu Jan 11, 2018 10:28 am

FIREchief wrote:
Thu Jan 11, 2018 12:18 am
How on earth could it cost $100K to remodel a kitchen and dining room? I'm not sure how you would even remodel a dining room, other than new paint/carpet/furniture. That sounds like about $3K - $4K tops.
Mingus wrote:
Thu Jan 11, 2018 12:05 am
I can't imagine spending the 25% of the value of a home/land on upgrading one room in the house. Dining room will be a fraction of the cost of the kitchen.

Seems like a foolish use of the banks money.
Speaking here as someone contemplating a kitchen remodel. IF you can afford it, IF you enjoy using the kitchen, it could be a reasonable use of money and much of it might be recovered on resale (not that resale matters if you are staying for 10-20 years). Certainly a better use of money than buying a BMW or such.

It WOULD make sense to ask whether a good result can be had without moving walls, as that tends to be expensive and may uncover unexpected problems that add even more to the cost.

Doing a kitchen that is cheap relative to the neighborhood would end up with something that adds no value, in addition to being a continuing annoyance.

Mingus
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Re: How to pay for a new kitchen and dinning room

Post by Mingus » Thu Jan 11, 2018 3:00 pm

adamthesmythe wrote:
Thu Jan 11, 2018 10:28 am



Speaking here as someone contemplating a kitchen remodel. IF you can afford it, IF you enjoy using the kitchen, it could be a reasonable use of money and much of it might be recovered on resale (not that resale matters if you are staying for 10-20 years). Certainly a better use of money than buying a BMW or such.

All of that is true. I don't disagree. However, a nice kitchen can be had for a lot less than 100K. And it doesn't make sense to have one room in the house a level 10 finish, when the rest of the house is a level 7.

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Pajamas
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Re: How to pay for a new kitchen and dinning room

Post by Pajamas » Thu Jan 11, 2018 3:10 pm

They should wait until they can pay cash for the renovation. As others have pointed out, $100k on a kitchen and dining room renovation for a $400k house is a bit out of proportion and then to pay interest on top of that for years is practically insane.

If they are bound and determined to do it and must get a loan, the interest from a mortgage on the house might at least be deductible, but that is just a minor offset for a big expense and shouldn't make it seem like a good idea to do it in the first place.

quantAndHold
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Re: How to pay for a new kitchen and dinning room

Post by quantAndHold » Thu Jan 11, 2018 3:34 pm

Is the current kitchen broken? I can’t imagine $100k to replace something that isn’t broken.

Our house in Seattle had a fancy kitchen with the Wolf stove and the whole nine yards. When people came over, they were impressed by the red knobs on the stove. I think the appraiser added $10k to the value of the house for kitchen fancyness.

Our current house was built in 1930 and has an old school galley kitchen that we’ve spent about $15k over the years modernizing. It’s got ordinary appliances, tile floor, quartz countertops, and the original wood cabinets, which we paid someone to modify to be modern counter depth.

I much prefer cooking in the ordinary kitchen. The stove heats up faster and it has a self cleaning oven, and there’s less walking to get from stove to sink to fridge. It also has more cupboard space than the fancy kitchen. But the stove doesn’t have red handles, so it doesn’t impress our guests nearly as much.

Edit to add...if it’s a $400k house, how much of that $400k is house, and how much is the dirt the house is sitting on? Is it possible they’re considering spending 1/3 to 1/2 of the value of the building just for a kitchen?

William104
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Re: How to pay for a new kitchen and dining room

Post by William104 » Thu Jan 11, 2018 3:44 pm

I'm in the real estate business for a living and even in my higher cost of living area to build, that 100k price is outrageous. That is not even taking into account the home value is only 400k! This should be 50k at the high end of things.

DSInvestor
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Re: How to pay for a new kitchen and dining room

Post by DSInvestor » Thu Jan 11, 2018 3:54 pm

I suggest saving up and paying cash for the renovation.
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Re: How to pay for a new kitchen and dining room

Post by HueyLD » Thu Jan 11, 2018 3:55 pm

CWRadio wrote:
Wed Jan 10, 2018 9:51 pm
My son called me last night and said he and his wife decided to remodel their kitchen and dinning room. It will cost about $100,000.

His question to me what is the best way to finance the remodeling?

His current house will be payed off in one year.
House is worth about $400,000
He does not have $100,000 in cash.
Has a well funded 401K and IRA.

Any advice would be appreciated. Type of loan, terms, questions to ask, web site, etc or anything else he needs to know.

Since I am the dad he thinks I know everything. That is why I am asking for help.
Thanks Paul
I think they want the Bank of Dad to pay for the remodeling.

And I think dad should give them the money as an early inheritance if dad can afford it.

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