Return to the Household Finances Forum | Post a Follow-Up

 o
Making home repairs using retirement savings

Posted by jane__ny (My Page) on
Sun, May 6, 07 at 1:22

My husband and I are planning to sell our house in another year. Our house needs some major repairs, roof, driveway, exterior paint. We live in a highly sought-after area of NY. Should we apply for a home equity loan or use our savings to finance these repairs? We still have a mortgage of approx. $80,000 on the house. Husband is in his 70's and will stop working next year. These repairs cannot wait.

Thanks,


Follow-Up Postings:

 o
RE: Making home repairs using retirement savings

As a general rule, you're better off borrowing money than tapping into savings as long as the interest rate of the loan is less than what you're making on the savings, after taking taxes into account.

In practice, this comparison may be difficult to make, because both the prospective loan and the savings' earnings may be variable in rate and thus hard to forecast. In that case, you need to factor in the cost of misestimating as well. But the basic idea is still sound.


 o
RE: Making home repairs using retirement savings

I would get the loan. At this time, you have about all the retirement savings you will ever get. Unless you have way too much money saved for retirement, why take some out when you cannot replace it?


 o
RE: Making home repairs using retirement savings

retirement savings sometimes can't be tapped without penalty.


 o
RE: Making home repairs using retirement savings

Are there tax-deferred retirement savings at issue? As someone said, sometimes using them involves penalties.

Would a Line of Credit from credit union or bank be available?

And at what rate of interest?

Maybe use that to finance the repairs.

Would you be interested in a second mortgage - and what rate of interest, compared with a Line of Credit? Also, maybe hard to get, in your 70s.

Do you have credit cards? Paying off balances in full monthly? It's important to do that.

Good wishes as you seek to make the most advantageous decision.

ole joyful


 o
RE: Making home repairs using retirement savings

The penalty shouldn't apply if the OP and spouse are already over 70.


 o
RE: Making home repairs using retirement savings

If you have the money and you are 70 years old I would pay for the repairs with cash, sell the house and retire to a less expensive area. Main reason is that you will pay interest + closing costs + mortgage tax on the home equity loan, and there is no low risk investement that will come anywhere close to beating that.


 o
RE: Making home repairs using retirement savings

Most home equity loans do not have closing costs or fees. We paid a total of 75 for ours. If you really think you can sell in less than a year I would definitely do the loan unless the interest rate is ridiculous or the amount is miniscule compared to what you have saved. For example, I would not bother with a 25k loan if you have over 1M in savings


 o
RE: Making home repairs using retirement savings

Thanks for the replies. We have a mortage on the home of $50,000, a home equitity loan of $40,000 with an attached line-of-credit for $500,000 which we never touched. The two other loans are fixed at 6.6% but if we use the line-of-credit it will rise depending on the prime rate. I took it in case of emergency. The repairs will cost around $40,000 (if we do them all). Husband is 73, I am 57. He will probably retire next year (although, he doesn't really want to ever retire.)We couldn't afford to stay here if he retires. Everything is so up-in-the-air and it makes me nervous. Not sure how to proceed. I feel we should use cash.

Jane


 o
RE: Making home repairs using retirement savings

Jane, I see that there is not much action here since May. Just wanted to tell you I have been faced with the same decision as you, concerning using l O C or taking out of IRA. As people say the IRA money is in place and upon withdrawal you will be charged additional income tax. Better to take LOC and take tax right off.


 o Post a Follow-Up

Please Note: Only registered members are able to post messages to this forum.

    If you are a member, please log in.

    If you aren't yet a member, join now!


Return to the Household Finances Forum

Information about Posting

  • You must be logged in to post a message. Once you are logged in, a posting window will appear at the bottom of the messages. If you are not a member, please register for an account.
  • Please review our Rules of Play before posting.
  • Posting is a two-step process. Once you have composed your message, you will be taken to the preview page. You will then have a chance to review your post, make changes and upload photos.
  • After posting your message, you may need to refresh the forum page in order to see it.
  • Before posting copyrighted material, please read about Copyright and Fair Use.
  • We have a strict no-advertising policy!
  • If you would like to practice posting or uploading photos, please visit our Test forum.
  • If you need assistance, please Contact Us and we will be happy to help.


Learn more about in-text links on this page here