Determining home equity loan value

[Sigarms]

Believe me, the house REALLY needs renovating. This is the master bathroom.

 

[riptides]

Believe me, the house REALLY needs renovating. This is the master bathroom.

View attachment 4381499

Retro is making a comeback.

 

[Sigarms]

Retro is making a comeback.

Not in our house it is LOL

You can see the master bathroom in the window to the left of the toilet. We're losing a wall to increase the space of both bathrooms, and the master will cut into this one.

 

[ericm979]

Oww, my eyes!

 

[quicksandfarmer]

I don't want to sound like I'm bragging, but I think my shoulders are broad enough that I'd have to turn sideways to use that toilet.

 

[riptides]

Not in our house it is LOL

You can see the master bathroom in the window to the left of the toilet. We're losing a wall to increase the space of both bathrooms, and the master will cut into this one.View attachment 4382587

That is money.

 

[Sigarms]

That is money.

If you're referring to renovations, you're absolutely correct.

Both bathrooms are totally stripped now down to the studs except for the existing piping.

Pretty much new plumbing per piping is being replaced and then set according to where the new showers, toilets and sinks will go. We're losing a hallway to increase the bathroom space between the two bathrooms (to increase the master bathroom size. Stackable washer and dryer going in the guest bathroom so laundry can be done on the first floor instead of the unfinished basement.

Basically an entire gut job including exterior.

Thus the reason why I wasn't as enthused as my wife when we went down this path

 

[MossRoad]

I understand precisely how they work. 20+ years in financial services.

HELOC has the same negatives as a Home Equity Loan.

One place I worked had their HELOC tied to a checkbook. People were writing checks on equity to pay for everyday transactions.

I disagree.
Home equity loan they hand you a lump sum and you have to start paying it back with interest immediately every month.

HELOC you only have to pay interest on what you draw against, until it comes due, then you start paying monthly like a mortgage for 20 years (or whatever the agreement). So if you don't draw anything, you don't pay anything. If you draw $10k, you could only pay interest on the $10k until it comes due, then take 20 years to pay it off, or, you could pay it all off tomorrow. It's a lot more flexible.

I'd much rather have a $100K line of credit if I need it and make no payments, than take out $100K and have to start paying it back with interest immediately.

They serve different purposes.

 

[MossRoad]

I guess we could do that (we basically have a checkbook), however, it's only going towards the new home and renovations. That's what's in our budget

Besides that, to my dismay, wife said I can't use that checkbook for a 911! Go figure...

Our heloc had a card. So for the most part, it WAS a checkbook. Just made of plastic instead of paper. We called it "the big card" and kept it locked in the gun safe.

 

[riptides]

If you're referring to renovations, you're absolutely correct.

Both bathrooms are totally stripped now down to the studs except for the existing piping.

Pretty much new plumbing per piping is being replaced and then set according to where the new showers, toilets and sinks will go. We're losing a hallway to increase the bathroom space between the two bathrooms (to increase the master bathroom size. Stackable washer and dryer going in the guest bathroom so laundry can be done on the first floor instead of the unfinished basement.

Basically an entire gut job including exterior.

Thus the reason why I wasn't as enthused as my wife when we went down this path

I meant the tub was money.

Renovations are super expensive. First hand experience here.

Budget went over three times. Naive and the unknowns when dealing with old homes.

I'd say two thirds of our farm house was demolished. Only the original 1920's remained and that was gutted in parts to the floors.

But...my wife had vision. I learned to keep up with that.

The end result will be special for sure. You will make it your new home!

 

[MossRoad]

Believe me, the house REALLY needs renovating. This is the master bathroom.

View attachment 4381499

Awesome!

Ours had green tile on the bottom and grey where your's has wall paper. They are Miraplas brand. They were in excellent condition, just stuck in the 50s. We were going to remodel our bathroom, but the tub was built into the wall pretty far. We'd have had to bust it out, gut the walls, ceiling, floor, everything....

So we called a guy that does tub reglazing. He gave us an estimate on the tub. Good price. Then we asked if he did wall tiles. He said he didn't see why not. Then we told him it was plastic. He said he never tried it before, but was willing to give it a shot. So we did. It came out great!

Same price as a bathroom tear out if I did it myself, but ZERO work on my part and done in 2 days. I put in a new floor and we're good to go.

Was cleaning out the basement a couple weeks ago and found a case of the tiles in the back corner that the previous owner left.

Here's the stuff....

 

[Sigarms]

I meant the tub was money.

Renovations are super expensive. First hand experience here.

Budget went over three times. Naive and the unknowns when dealing with old homes.

I'd say two thirds of our farm house was demolished. Only the original 1920's remained and that was gutted in parts to the floors.

But...my wife had vision. I learned to keep up with that.

The end result will be special for sure. You will make it your new home!

Home was built in 1962 and it was a one couple who owned it.

Son lived with the mother to help her out for a year before she passed.

I had a couple of guys I trust on construction go over the house with me. Both said sound structure but they wouldn't buy it to flip it, however, if it was going to be our "forever home" and put more money into what we wanted done, it was a good solid house (honestly, I was kind of hoping they'd tell me/us they wouldn't touch it with a 10' pole LOL).

Believe, with new plumbing, new electrical and ripping out the oil furnace with new duct work (I can save a little there) we're paying about what the house cost us in renovations.

I kind of wanted this to be headache free myself, at our age, but like your wife, mine has a vision. We've only been married 22 years now, but she's never failed me when she had a plan that I wasn't 100% on board with.

The irony is if you saw the kitchen cabinets (which we aren't touching except for fitting the gas stove in) along with the intercom system that was there (we guess when the house was built) it was pretty high end for the time on a smaller house.

 

[riptides]

....

The irony is if you saw the kitchen cabinets (which we aren't touching except for fitting the gas stove in) along with the intercom system that was there (we guess when the house was built) it was pretty high end for the time on a smaller house.

LOL on the kitchen. One of the first pic's we took of the house as I started in the Kitchen.



Today, it remains one of the last projects to complete. All I did was strip, paint, new plumbing, electric and replace appliances. It will need new subfloors and the walls need to be removed. Basically a gut down to the frame, again. This was/is the oldest part of our house.

 

[Torvy]

Different purposes, sure. They have the same drawbacks. A HELOC pulls your credit, has a cost to set up, and counts against your credit for the full amount, whether you use it or not. Rates on a HELOC are typically higher as well.

 

[sunandsand]

Kind of an old thread, but I'd like to comment on appraisals.

Had a place I wanted to sell, called an appraiser, got what I thought was a fairly lowball number.

Called a second appraiser, while he was getting around to it, the tenant mowed the lawn, I paid him $25 to do it.

New appraisal came in $70K higher than the old one, it was done less than a month later.

Told the tenant I would pay him $25 each time to mow the lawn every hour on the hour - a $25 investment raised the "value" by $70K - what a great ROI!!! Hey, can we do this again?

Also had another appraiser come into another house where I had a small statue of Venus de Milo on a desk. She was shocked, shocked I say, because the statue was bare-chested, and she told me that was disgusting. I told her that I was sorry she felt that way, the original of that statue is on display at the Louvre.

Got a crappy appraisal on that one (which I wound up not needing anyway) primarily because that appraiser's education was sadly neglected.

Appraisals seem to be a little like dating - you sometimes have to kiss a lot of toads before you find the magic princess.

Best Regards,
Mike/Florida

 

[wilso]

Believe me, the house REALLY needs renovating. This is the master bathroom.

View attachment 4381499

I feel your pain on that master bathroom. There’s nothing like living with a space that desperately needs a refresh to make you start crunching numbers on home equity. It’s a process, but getting that extra value back into the house usually makes the headache of the loan paperwork worth it in the end.

I’ve actually been spending way too much time lately browsing design ideas to stay motivated, and I came across Ricco Bathrooms. Looking through their showroom setups is great for visualizing what a modern layout could actually look like once the old tile is finally gone. Good luck with the renovation, and please share the "after" shots!

 

[rustycloe]

Pretty much what I did. We owned our previous home free and clear and I then took out a first mortgage on it to help finance the new house build. Then paid it off when we sold it and moved in. Now that was a first mortgage and not a HE loan, but same principle.

Sig - did you ask the CU about a bridge loan for the new place? They generally run for a few months and you pay interest only. They can often be extended a few months but there is probably a cap on how long. Then when the old place sells, you can then convert into a conventional mortgage or pay it off.

But if you own your house free and clear, all you would need to do is get a normal mortgage on the new place. Then when the old place sells, you either pay it off, or pay off a large chunk of it, and then continue paying like normal until gone. Bridge loans are for when you are carrying a mortgage and now need to carry 2 mortgages for a relatively short time. It doesn't sound like you need that.

Hello. I don’t understand the concept of home equity. You have a house that is worth a certain amount of money according to the market rate, and not the value that the tax assessor puts on it. Then you figure out how much it’s worth to your own budget based on how much you have left on the mortgage? Or how much you’ve paid out? Here’s my situation. I refi’d in 2021 for 2.75% 30 year at $150k We paid $310k in 2017 I don’t know how to find the market value. How do I do the math to figure out how much equity we have in the house?

 

[Muhammad]

Hello. I don’t understand the concept of home equity. You have a house that is worth a certain amount of money according to the market rate, and not the value that the tax assessor puts on it. Then you figure out how much it’s worth to your own budget based on how much you have left on the mortgage? Or how much you’ve paid out? Here’s my situation. I refi’d in 2021 for 2.75% 30 year at $150k We paid $310k in 2017 I don’t know how to find the market value. How do I do the math to figure out how much equity we have in the house?

1. Check comps of similar properties that have sold near you (use zillow.com or redfin.com, both free)

2. Ask a realtor for your valuation if you're thinking of selling.

3. A bank assesses the value when you're applying for a loan. You pay for the assessment.

I think you understand the concept but you just don't know your market value.

Let's just pencil in the math. Say your property is worth $400k now. Your 2020 loan might have a balance of $130k (I don't know the length of your loan so this number might be off). But in that scenario:

$400,000 value
-$130,000 loan balance
--------------------
$270,000 equity

 

[2manyrocks]

Banks love HELOCs because in many cases customers use them like credit cards but the bank is secured against loss by a lien on the customer's home. Not saying they don't have valid financial purposes, but HELOCs are not always a good idea.

 

[RayIN]

Since you began this thread everything has changed with the housing market.
IMO it's time to start over with your questions.
New Day is running adds stating they offer equity loans of 100% of home value. Basically you're selling them your home.

FWIW, my wife and I are in this position; already in our forever home; BUT, now the reality of having to move to assisted living is upon us.
Don't count on both of you being able to function without assistance.
This is harsh reality.