Major Home Repair-Best Way to Pay

[unrequited23]

Our home needs major foundation repairs. Two main ways to repair have been presented--interior bracing or excavating the exterior, rebuilding the wall, along with replacing downspouts and any drain tiles not functioning properly. We've chosen the more expensive route after getting four bids. My question is what is the best way to pay for the repair. It would clear out 85% of our savings, leaving about two months living expenses. The best personal loan rate we've found is 5.99%. We have not looked into home equity loans yet...We've lived here for six years and have only reduced our mortgage balance by 18%. Upcoming major expenses include replacing gutters with larger size and some sort of gutter shield, replacing the stamped concrete patio and walkway that will be removed for the foundation repair with probably the most inexpensive option that won't increase hydro-static pressure on the foundation and a partial driveway replacement in a few years. We are working on cutting expenses and increasing income.

Thanks for any advice.

 

[barkley]

first of all-i'm so sorry. it's terrible when major home repairs are necessitated. i'm guessing none of this is covered by insurance or can be traced back to the responsibility of others-newer build (builder), non disclosure of a known problem by seller (i live in a state with significant protections for home buyers YEARS after the fact). if it's all on you to pay for then if you belong to a credit union they are a great resource to speak to regarding your options. you say you've reduced your mortgage by 18% since buying 6 years ago but mortgage rates have gone down tremendously and home values have increased insanely. even with major repairs to do your home could be worth enough that a re-fi at a higher amount (mortgage balance plus cost of repairs) could end up being at or potentially less than you are paying now.

best of luck with all your repairs.

 

[unrequited23]

even with major repairs to do your home could be worth enough that a re-fi at a higher amount (mortgage balance plus cost of repairs) could end up being at or potentially less than you are paying now.

Thanks. I haven't even considered refinancing. I thought our 3.87% rate 'good enough' to not even look at it when rates dropped and we didn't have a major home repair looming.

 

[Heather07438]

I hope you’re pleasantly surprised with your refinancing/home improvement options.

You might want to also check overall water patterns on your property. As neighborhoods continue being changed and developed, runoff water sometimes get redirected causing new issues on adjacent properties. Observe the next large rainstorms coming thru. Where is the water streaming and is any pooling? Before making the needed repairs it’s a good time to check if a French drain might prevent future headaches.

 

[kuhltiffany]

Why would you take out a loan and waste money on interest if you have the money sitting in savings? Pay cash and then re-start your savings account...

 

[OrangeBirdGirl]

I would also refinance and put the repairs into your mortgage. Assuming you had a 30 year loan you could go back to another 30 year loan and assuming payments are manageable, figure out payments for having it paid off in 24 years for what you'd currently have left. I'm all about paying stuff out of savings but for us, clearing out 85% of our savings for a repair wouldn't make us feel comfortable. You never know what could happen job wise or health wise before you could rebuild your savings.

 

[tvguy]

As for paying for, I would take out whatever loan has the lowest interest rate.
Next I would consider contacting your Home Inspector who missed something that most certainly was there if you have only lived there 6 years. He or she should be bonded and that could help pay a little of the bill. Of course, you can always take them to court.

 

[atxbound]

May be a bit controversial take.. is it possible to sell your house and buy a new one without the current issues? There's a hot market in a lot of places and places like zillow will buy the house for more than expected.

 

[LYSE]

Why would you take out a loan and waste money on interest if you have the money sitting in savings? Pay cash and then re-start your savings account...

If it's a refi at today's ridiculously low rates it likely is cheaper to take the loan than to part with the cash.

I would go the refi route and cash out some of that equity, likely still reducing your payment.

 

[tvguy]

May be a bit controversial take.. is it possible to sell your house and buy a new one without the current issues? There's a hot market in a lot of places and places like zillow will buy the house for more than expected.

Well, if the person buying the house has a good home inspector they will catch the issues and make them fix them before the sale closes. So they don't save any money.

 

[atxbound]

Understand they may have trouble selling to a traditional buyer. However, there's other house buying services now (ihome or internet home) where you get a quote online and the place follows up with walk through and lower closing cost. The ihome places are trying to get market share which can work out really well for a seller.

 

[tvguy]

Understand they may have trouble selling to a traditional buyer. However, there's other house buying services now (ihome or internet home) where you get a quote online and the place follows up with walk through and lower closing cost. The ihome places are trying to get market share which can work out really well for a seller.

Yes, but they are going to cut their offer low enough to cover repairs.

 

[pigletto]

Why would you take out a loan and waste money on interest if you have the money sitting in savings? Pay cash and then re-start your savings account...

Completely agree.
I would use the savings .They aren’t making much of anything if not invested. I would also refi and use the money saved from the refi to rebuild the savings.

 

[unrequited23]

Selling right now is not an option. Part of the reason we are going for the wall replacement vs the bracing is the resale value if and when we decide to move. The earliest I would see a move would be 4 years from now. The home is 45 years old, so unfortunately we can't go back to the builder. Besides having the best quote the company we chose to go with does also french drains, exterior grading, etc. The home behind us put in an unpermitted french drain, where they had their gutters drain and it tied into our next door neighbors backyard drain that does not tie in to the city storm sewers. While this situation was on-going our yard had so much water going through it there was a current. We got the city involved, the neighbors yard is up code and there is no longer a river when it rains.

Honestly, I freaked out by using that percentage of our savings. it's looking like a refi is our best option.

 

[RamblingMad]

May be a bit controversial take.. is it possible to sell your house and buy a new one without the current issues? There's a hot market in a lot of places and places like zillow will buy the house for more than expected.

I'd test the market. If you can get someone to buy it from you in cash without an inspection, then I'd go that route. Otherwise, probably the cheapest interest wise would be a cash out refi.

 

[starry_solo]

good luck with whatever you decide!

 

[dvcgirl67]

I'd test the market. If you can get someone to buy it from you in cash without an inspection, then I'd go that route. Otherwise, probably the cheapest interest wise would be a cash out refi.

I know in my state that you'd have to disclose this kind of defect in your home...inspection or no inspection. Otherwise I'd worry very much that someone would come to sue me later. I suppose you could disclose it, and sell to an investor who flips homes and wanted to take on the repair.

We had what sounds like the same issue two years ago. We were in the middle of doing more cosmetic things to our home. Painting interior, new living room/bedroom furniture, new home theater set-up with TV, new kitchen and bathroom fixtures...you know, the fun stuff . During that time we realized that we had a big problem with our basement walls. Our home is over 100 years old and we noticed the beginning of black mold and that there was issues with hydrostatic pressure over time. We also had 4 bids and went with the most expensive one. Big job....had to excavate around house to foundation base and repair/waterproof walls. Interior basement walls also repaired. While we were at it, poured a new basement floor. And during that job we found that our clay sewer pipe bit the dust. Also had new basement windows put in. Whole job to fix foundation/French drain/new floor/sewer pipe/windows....was just shy of 40K.

It's not fun when you have a big unexpected home repair like this one, but we used our emergency fund which totaled one year of expenses at that time (75K) and it took a little over half of that. Since that experience, we took our emergency fund to two years of expenses....that kind of unexpected repair and a pandemic with nothing to do/nowhere to go.....helped us to reevaluate our risk tolerance.

 

[atxbound]

Selling right now is not an option. Part of the reason we are going for the wall replacement vs the bracing is the resale value if and when we decide to move. The earliest I would see a move would be 4 years from now. The home is 45 years old, so unfortunately we can't go back to the builder. Besides having the best quote the company we chose to go with does also french drains, exterior grading, etc. The home behind us put in an unpermitted french drain, where they had their gutters drain and it tied into our next door neighbors backyard drain that does not tie in to the city storm sewers. While this situation was on-going our yard had so much water going through it there was a current. We got the city involved, the neighbors yard is up code and there is no longer a river when it rains.

Honestly, I freaked out by using that percentage of our savings. it's looking like a refi is our best option.

One other question- can you possibly file a claim against your neighbor's insurance to pay for some of your repair costs?
As far as the selling, I have heard some crazy stories where the ihome buying companies are buying properties in serious need of repair for top market value. It doesn't make sense to me but the companies are trying to get market share and are flush with cash?

 

[onegai]

You also don't have to take out a loan for the full cost of the repairs. You can spend half your savings, leaving you with a more comfortable savings cushion and take the rest out on a refi or personal loan.

 

[Shelly F - Ohio]

Thanks. I haven't even considered refinancing. I thought our 3.87% rate 'good enough' to not even look at it when rates dropped and we didn't have a major home repair looming.

3.87 is rather high we just got a loan for 2.25 I would refinance. We were able to refi for $275. in closing cost with a $100 home depot GC so it cost $195. It was with Third Federal.