Funding emergency home repair

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Topic Author
kski74
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Funding emergency home repair

Post by kski74 » Fri Mar 15, 2019 7:09 pm

We have to do a structural rebuild of our house roof (no attic and zero insulation) after extensive damage from ice dams. This happened in year one of buying the house.

We are looking at $40,000 to redo the roof (structure + bringing the insulation up to code) and are trying to figure out the best approach to pay for it.

Financial situation:
House value around $620,000
Current loan: $450,000
Safety net account: $50,000
Income: $210,000/year (both employed in "stable jobs" -- 10+ years in current positions)
2 kids (11,9) - college bound hopefully
401k retirement accounts and some IRA accounts
College loans paid/1 small car loan/no credit card debt

Our mortgage guy offered us a 30-year cash out refinance loan, which would cash out $40,000 and pay for the roof. It would increase our monthly payments by $200 or so dollars. $450 is we pay back the loan in 25 years. (Our rate would go up less than 0.25% from current.)

What other options should we consider? HELOC? Using our Safety net cash? Any interest-free loans for energy efficiency improvements?

Thanks for your time and input!
Last edited by kski74 on Fri Mar 15, 2019 9:12 pm, edited 2 times in total.

runner3081
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Re: Funding emergency home repair

Post by runner3081 » Fri Mar 15, 2019 8:54 pm

Insurance not applicable here?

Topic Author
kski74
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Re: Funding emergency home repair

Post by kski74 » Fri Mar 15, 2019 9:09 pm

runner3081 wrote:
Fri Mar 15, 2019 8:54 pm
Insurance not applicable here?
No, not for the rebuild of the roof though they did cover the water damage from the ice dams.

sergio
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Re: Funding emergency home repair

Post by sergio » Fri Mar 15, 2019 9:22 pm

How old is this house? was it new construction?

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Nate79
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Re: Funding emergency home repair

Post by Nate79 » Fri Mar 15, 2019 9:28 pm

I would use half my emergency fund and pay for the remainder using a personal loan from a credit union only if all items need to be done asap. Otherwise I would pay for only the items that need to be done now with the emergency fund and then crank down on the budget to save the remainder, pay cash, and rebuild the emergency fund. I don't see why with your income this wouldn't take but a few months.

Topic Author
kski74
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Re: Funding emergency home repair

Post by kski74 » Fri Mar 15, 2019 9:31 pm

sergio wrote:
Fri Mar 15, 2019 9:22 pm
How old is this house? was it new construction?
Older house. Before energy crisis and roof codes. There is literally no insulation between ceiling and shingles.

JGoneRiding
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Re: Funding emergency home repair

Post by JGoneRiding » Fri Mar 15, 2019 9:39 pm

Refi would be my LAST option since it would raise your rate. And not just on 40k but the while thing! I would consider heloc but I would also first consider a combo of no interest credit cards and using your emergency fund. This is what it is for and you should be able to rebuild it fast.

sergio
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Re: Funding emergency home repair

Post by sergio » Fri Mar 15, 2019 9:42 pm

kski74 wrote:
Fri Mar 15, 2019 9:31 pm
sergio wrote:
Fri Mar 15, 2019 9:22 pm
How old is this house? was it new construction?
Older house. Before energy crisis and roof codes. There is literally no insulation between ceiling and shingles.
I wonder why this year, being the first year you owned the house, ice dams were such a problem that they destroyed the roof. Perhaps previous owners raked the roof, kept the upstairs colder, removed dams more aggressively...

I wouldn't take out what's essentially a 30-year medium-interest loan for $40k in your situation. Plus I assume the refi will have $1.5-2.5k in fixed closing costs as well. If you have a Roth IRA that you can use in a life/death situation, then I would just bite the bullet and use the emergency fund, and then slash my spending to the bare minimum needed to survive until the emergency fund is replenished. With your income it shouldn't take more than 4-6 months.

Tdubs
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Re: Funding emergency home repair

Post by Tdubs » Fri Mar 15, 2019 9:45 pm

Use your emergency fund and pay cash. Why take out a loan to protect your emergency fund? You can refill the emergency fund quick enough.

pasadena
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Re: Funding emergency home repair

Post by pasadena » Fri Mar 15, 2019 9:52 pm

I don't think a cash-out refinance is ever a good idea unless you have literally no other choice (or if you're very old, maybe), especially with a higher interest rate. Not only will you pay interest on your roof for 30 years, but you will also increase the amount paid on the house, and you will have to pay closing costs. You should calculate how much your roof will have cost you after 30 years, and how much more the house will have cost you too.

You have the money - that is what an emergency fund is for. If you want to protect yourselves a bit more while you replenish it, o rmake sure you can get more money if the work goes over the budgeted amount, then open an HELOC and don't use it.

-ryan-
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Re: Funding emergency home repair

Post by -ryan- » Sat Mar 16, 2019 7:47 am

I agree with the posters that say use your emergency fund first. It shouldn’t be a talisman for security. It should be the first line of defense against large, unexpected costs. If another emergency pops up in short order, deal with it at that time and use financing only if you absolutely have to, but for this project you don’t have to finance, so I wouldn’t.

I used to sit on a relatively large emergency fund and refuse to touch it, which meant I was financing a few things that I could easily afford to just pay for. I paid them off, found that the fund rebounds quickly (especially with fewer monthly payments) and am planning on doing the same again when necessary.

FederalFIRE
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Re: Funding emergency home repair

Post by FederalFIRE » Sat Mar 16, 2019 5:42 pm

Agreed with other posters on using your emergency fund. Especially in a dual income house with "stable jobs" at your income level. You could likely cashflow part of the repair and use the EF for the remainder. Assuming your jobs really are stable, the likelihood you both end up laid off immediately is low. As soon as you pay for the roof repair you should push as much as you can back into the EF without knocking off your tax-advantaged savings.

quantAndHold
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Re: Funding emergency home repair

Post by quantAndHold » Sat Mar 16, 2019 6:01 pm

I would use the emergency fund. That’s what it’s for.

I would also get a HELOC as a backstop while you’re rebuilding the emergency fund, but not use it unless you have a second large emergency.

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segfault
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Re: Funding emergency home repair

Post by segfault » Sat Mar 16, 2019 6:25 pm

Emergency fund or HELOC. You can probably find a local bank that will write a HELOC at 100% LTV.

delamer
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Re: Funding emergency home repair

Post by delamer » Sat Mar 16, 2019 6:31 pm

quantAndHold wrote:
Sat Mar 16, 2019 6:01 pm
I would use the emergency fund. That’s what it’s for.

I would also get a HELOC as a backstop while you’re rebuilding the emergency fund, but not use it unless you have a second large emergency.
My thoughts also, but only because you feel your jobs are stable.

Going forward, I would have 1) an emergency fund for income replacement (in case of job loss or temporary disability) and 2) a separate fund for house/auto repairs. They might not be literally separate, but the monies would be earmarked for different purposes. Like 3 months of expenses for income loss purposes and then another $10,000 for repairs.

Topic Author
kski74
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Re: Funding emergency home repair

Post by kski74 » Sat Mar 16, 2019 6:33 pm

pasadena wrote:
Fri Mar 15, 2019 9:52 pm
You have the money - that is what an emergency fund is for. If you want to protect yourselves a bit more while you replenish it, o rmake sure you can get more money if the work goes over the budgeted amount, then open an HELOC and don't use it.
I certainly like the idea of opening a HELOC as another security layer while we rebuild our emergency fund. Thanks for the suggestion.

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kski74
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Re: Funding emergency home repair

Post by kski74 » Sat Mar 16, 2019 6:37 pm

delamer wrote:
Sat Mar 16, 2019 6:31 pm
quantAndHold wrote:
Sat Mar 16, 2019 6:01 pm
I would use the emergency fund. That’s what it’s for.

I would also get a HELOC as a backstop while you’re rebuilding the emergency fund, but not use it unless you have a second large emergency.
My thoughts also, but only because you feel your jobs are stable.

Going forward, I would have 1) an emergency fund for income replacement (in case of job loss or temporary disability) and 2) a separate fund for house/auto repairs. They might not be literally separate, but the monies would be earmarked for different purposes. Like 3 months of expenses for income loss purposes and then another $10,000 for repairs.
Agree. And that's what we had. But the house/auto repair fund has taken a serious hit in the past two years. Since we bought the house, we'd had several other smaller emergencies and home improvement we had planned when buying the house that have drained that fund. I always tried to have $15,000 in that separate fund, but it's down to a few thousand. This house has been a bit like: Image

delamer
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Re: Funding emergency home repair

Post by delamer » Sat Mar 16, 2019 6:43 pm

kski74 wrote:
Sat Mar 16, 2019 6:37 pm
delamer wrote:
Sat Mar 16, 2019 6:31 pm
quantAndHold wrote:
Sat Mar 16, 2019 6:01 pm
I would use the emergency fund. That’s what it’s for.

I would also get a HELOC as a backstop while you’re rebuilding the emergency fund, but not use it unless you have a second large emergency.
My thoughts also, but only because you feel your jobs are stable.

Going forward, I would have 1) an emergency fund for income replacement (in case of job loss or temporary disability) and 2) a separate fund for house/auto repairs. They might not be literally separate, but the monies would be earmarked for different purposes. Like 3 months of expenses for income loss purposes and then another $10,000 for repairs.
Agree. And that's what we had. But the house/auto repair fund has taken a serious hit in the past two years. Since we bought the house, we'd had several other smaller emergencies and home improvement we had planned when buying the house that have drained that fund. I always tried to have $15,000 in that separate fund, but it's down to a few thousand. This house has been a bit like
If the roof is not up to code, do you have any recourse with the sellers?

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Kenkat
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Re: Funding emergency home repair

Post by Kenkat » Sat Mar 16, 2019 6:56 pm

What would the rate be on the refinance? Would the interest be deductible or do you take the standard deduction?

Topic Author
kski74
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Re: Funding emergency home repair

Post by kski74 » Sat Mar 16, 2019 7:04 pm

-ryan- wrote:
Sat Mar 16, 2019 7:47 am
I agree with the posters that say use your emergency fund first. It shouldn’t be a talisman for security. It should be the first line of defense against large, unexpected costs. If another emergency pops up in short order, deal with it at that time and use financing only if you absolutely have to, but for this project you don’t have to finance, so I wouldn’t.

I used to sit on a relatively large emergency fund and refuse to touch it, which meant I was financing a few things that I could easily afford to just pay for. I paid them off, found that the fund rebounds quickly (especially with fewer monthly payments) and am planning on doing the same again when necessary.
Thanks Ryan! I've had this fund for many years and agree, I've always looked at it an untouchable asset. A bit ridiculous. Sounds like it;s time to bite the bullet!

Topic Author
kski74
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Re: Funding emergency home repair

Post by kski74 » Sat Mar 16, 2019 7:05 pm

Kenkat wrote:
Sat Mar 16, 2019 6:56 pm
What would the rate be on the refinance? Would the interest be deductible or do you take the standard deduction?
4.5% on refinance. Interest would be deductible.

Topic Author
kski74
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Re: Funding emergency home repair

Post by kski74 » Sat Mar 16, 2019 7:10 pm

delamer wrote:
Sat Mar 16, 2019 6:43 pm
If the roof is not up to code, do you have any recourse with the sellers?
No, the roof is grandfathered in, but very impractical as we are basically heating the universe all winter and cooling the stars in summer. And then the risk for ice dam damage can also a bit unnerving if we are away from home during a major storm. It's the perfect combo for serious ice dams. Flat roof and no insulation in zone 5. When we had the ice dam incident, it was -5F outside and water was pouring into the house from the water on the roof.

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kski74
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Re: Funding emergency home repair

Post by kski74 » Sat Mar 16, 2019 7:18 pm

sergio wrote:
Fri Mar 15, 2019 9:42 pm

I wonder why this year, being the first year you owned the house, ice dams were such a problem that they destroyed the roof. Perhaps previous owners raked the roof, kept the upstairs colder, removed dams more aggressively...

I wouldn't take out what's essentially a 30-year medium-interest loan for $40k in your situation. Plus I assume the refi will have $1.5-2.5k in fixed closing costs as well. If you have a Roth IRA that you can use in a life/death situation, then I would just bite the bullet and use the emergency fund, and then slash my spending to the bare minimum needed to survive until the emergency fund is replenished. With your income it shouldn't take more than 4-6 months.
It's more likely than not that this has been an ongoing problem with the house and not the first time this has happened. We essentially had to gut the house to do the water remediation (damaged wall insulation, mold, etc.). It's likely that some of the previous owners decided to ignore what they couldn't see behind the walls.

Thanks for your input on using the emergency fund.

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SevenBridgesRoad
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Re: Funding emergency home repair

Post by SevenBridgesRoad » Sat Mar 16, 2019 7:52 pm

You've gotten great financial advice. Here's some additional things to think about regarding the roof, based on personal experience. Same thing happened to us two winters ago. Insurance paid for most of the interior rebuild. We paid for the roof replacement ourselves (out-of-pocket...no finacing). You mentioned a flat roof, but I wasn't clear if your entire roof was flat or if there was some part of it pitched. If totally flat some of what I write is not applicable in your case.

Code at the time of our original build (we are not the original owners) required ice shield underlayment to go up only four feet from roof edge. This is nowhere near enough; code now requires six feet. We didn't think even that was enough. We paid extra to run ice shield all the way up the roof. Definitely go all the way up the valleys. We also moved a solar tube at the same time; it had been placed too close to a valley and increased the risk of an ice dam high up the roof. We had the flashing height doubled around our chimney; it was clearly not tall enough before.

We had tons of extra insulation blown into the attic.

Very carefully shop for your roofing company. You need someone who knows how to build a good solid roof in your winter conditions; someone with a great reputation. Don't take the low bidder necessarily and don't hire the roving roofing crews who are no doubt in your area now. Have a written understanding how the job will be supervised and who will be the onsite supervisor managing the crew. Have a written agreement that you get to inspect the ice shielding before shingles go up. Photos can work if you can't or won't go up on the roof (or at least on a ladder).

Then (again, if you have part flat and part pitched roof), consider laying some heat cable in the pitched areas, gutters and downspouts if you have those. We did this part as a DIY project but you can hire it done.

Finally, learn what it takes to manage your roof in a winter storm: roof raking is key (in a big dump, the heat cables won't keep up) and turning down the thermostat. Study up on how to manage the flat part of your roof.

We just finished about three weeks of another Snowpocalypse and came through just fine this time.
Retired 2018 age 61 | "Not using an alarm is one of the great glories of my life." Robert Greene

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kski74
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Re: Funding emergency home repair

Post by kski74 » Sun Mar 17, 2019 5:43 am

SevenBridgesRoad wrote:
Sat Mar 16, 2019 7:52 pm
You've gotten great financial advice. Here's some additional things to think about regarding the roof, based on personal experience. Same thing happened to us two winters ago. Insurance paid for most of the interior rebuild. We paid for the roof replacement ourselves (out-of-pocket...no finacing). You mentioned a flat roof, but I wasn't clear if your entire roof was flat or if there was some part of it pitched. If totally flat some of what I write is not applicable in your case.

Code at the time of our original build (we are not the original owners) required ice shield underlayment to go up only four feet from roof edge. This is nowhere near enough; code now requires six feet. We didn't think even that was enough. We paid extra to run ice shield all the way up the roof. Definitely go all the way up the valleys. We also moved a solar tube at the same time; it had been placed too close to a valley and increased the risk of an ice dam high up the roof. We had the flashing height doubled around our chimney; it was clearly not tall enough before.

We had tons of extra insulation blown into the attic.

Very carefully shop for your roofing company. You need someone who knows how to build a good solid roof in your winter conditions; someone with a great reputation. Don't take the low bidder necessarily and don't hire the roving roofing crews who are no doubt in your area now. Have a written understanding how the job will be supervised and who will be the onsite supervisor managing the crew. Have a written agreement that you get to inspect the ice shielding before shingles go up. Photos can work if you can't or won't go up on the roof (or at least on a ladder).

Then (again, if you have part flat and part pitched roof), consider laying some heat cable in the pitched areas, gutters and downspouts if you have those. We did this part as a DIY project but you can hire it done.

Finally, learn what it takes to manage your roof in a winter storm: roof raking is key (in a big dump, the heat cables won't keep up) and turning down the thermostat. Study up on how to manage the flat part of your roof.

We just finished about three weeks of another Snowpocalypse and came through just fine this time.
Thanks for sharing your experience. Our roof is not flat flat, but very low pitch and essentially flat for snow management purposes. It's not just one section, but the entire roof (a more modern type house) that is flat. We have vaulted ceilings throughout and no attic where insulation can be blown in. So we have to rip out the current roof and build a new structure to accommodate rigid insulation to bring it up to code. The research has been a bit daunting since it's not a type of house that most roofers have experience with and general contractors are also shaky about. But I think we found two companies that we feel comfortable with. They have done similar houses with similar architectural challenges and speaking with some of the references, it appears they solved the prior problems. Fingers crossed. Houses are an adventure. :wink:

sergio
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Re: Funding emergency home repair

Post by sergio » Sun Mar 17, 2019 9:36 am

kski74 wrote:
Sun Mar 17, 2019 5:43 am
SevenBridgesRoad wrote:
Sat Mar 16, 2019 7:52 pm
You've gotten great financial advice. Here's some additional things to think about regarding the roof, based on personal experience. Same thing happened to us two winters ago. Insurance paid for most of the interior rebuild. We paid for the roof replacement ourselves (out-of-pocket...no finacing). You mentioned a flat roof, but I wasn't clear if your entire roof was flat or if there was some part of it pitched. If totally flat some of what I write is not applicable in your case.

Code at the time of our original build (we are not the original owners) required ice shield underlayment to go up only four feet from roof edge. This is nowhere near enough; code now requires six feet. We didn't think even that was enough. We paid extra to run ice shield all the way up the roof. Definitely go all the way up the valleys. We also moved a solar tube at the same time; it had been placed too close to a valley and increased the risk of an ice dam high up the roof. We had the flashing height doubled around our chimney; it was clearly not tall enough before.

We had tons of extra insulation blown into the attic.

Very carefully shop for your roofing company. You need someone who knows how to build a good solid roof in your winter conditions; someone with a great reputation. Don't take the low bidder necessarily and don't hire the roving roofing crews who are no doubt in your area now. Have a written understanding how the job will be supervised and who will be the onsite supervisor managing the crew. Have a written agreement that you get to inspect the ice shielding before shingles go up. Photos can work if you can't or won't go up on the roof (or at least on a ladder).

Then (again, if you have part flat and part pitched roof), consider laying some heat cable in the pitched areas, gutters and downspouts if you have those. We did this part as a DIY project but you can hire it done.

Finally, learn what it takes to manage your roof in a winter storm: roof raking is key (in a big dump, the heat cables won't keep up) and turning down the thermostat. Study up on how to manage the flat part of your roof.

We just finished about three weeks of another Snowpocalypse and came through just fine this time.
Thanks for sharing your experience. Our roof is not flat flat, but very low pitch and essentially flat for snow management purposes. It's not just one section, but the entire roof (a more modern type house) that is flat. We have vaulted ceilings throughout and no attic where insulation can be blown in. So we have to rip out the current roof and build a new structure to accommodate rigid insulation to bring it up to code. The research has been a bit daunting since it's not a type of house that most roofers have experience with and general contractors are also shaky about. But I think we found two companies that we feel comfortable with. They have done similar houses with similar architectural challenges and speaking with some of the references, it appears they solved the prior problems. Fingers crossed. Houses are an adventure. :wink:
I also had my first experience with ice dams this winter although the worst of it was a 6" diameter brown stain on the ceiling in the master bathroom. The bathroom is at the corner of the house where the distance on the roof truss between the ceiling and the roof deck is only a few inches, so the bathroom heat doesn't have a chance to dissipate in the attic before hitting the plywood. I take hot steamy long showers so that was probably heating up the roof and causing the ice to melt from underneath. On top of that, some moron put the fart fan exhaust just a few feet away from the beginning of the unheated overhang. So we basically decommissioned that bathroom and turned off the air register to keep it cold. The water must have re-frozen since we didn't have further issues despite another month of brutal weather.

So the only advice I have to add on top of SevenBridgesRoad's great advice is to vent all the bathroom exhaust to the side of the house if possible.

Nissanzx1
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Re: Funding emergency home repair

Post by Nissanzx1 » Sun Mar 17, 2019 9:57 am

Wow - what a bad deal. I wish for you that this could have been found on pre-purchase home inspection. So sorry.

I’d tighten household budget to defensive position (no vacations/fancy meals out) until the $40K from EF is replaced. I’d probably pad EF to $60K or so this time. It will require sacrifice but this is a qualified five alarm emergency.

I also have to share that we just learned our best friends near Omaha just lost their home yesterday due to flooding. Their insurance will only cover the structure, no contents. Classic 1987 500SL 20K miles is completely covered over in garage. I only share this because it can always always be worse.

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kski74
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Re: Funding emergency home repair

Post by kski74 » Sun Mar 17, 2019 11:29 am

Nissanzx1 wrote:
Sun Mar 17, 2019 9:57 am
I also have to share that we just learned our best friends near Omaha just lost their home yesterday due to flooding. Their insurance will only cover the structure, no contents. Classic 1987 500SL 20K miles is completely covered over in garage. I only share this because it can always always be worse.
I’ll take house troubles over health any day. As rough as it’s been (unexpected and extensive asbestos remediation in the middle of the water remediation—weeks on end in hotels), it’s still just stuff and we are in a better financial situation than many to face it.

Traveler
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Re: Funding emergency home repair

Post by Traveler » Sun Mar 17, 2019 2:43 pm

As others have said, use the emergency fund. This is exactly what it is for and you can replenish it rather quickly.

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