A couple of nights ago it was a cool evening and we turned off the air conditioning and the house remained quite comfortable. On those nights I treasure sitting on the back deck, with a cup of coffee and reading a book and talking with my DH. It's a nice way to spend an evening. We started talking about painting the house and how hard it was to start the project with the rain and heat, which led to a new discussion.
My DH talked about getting a loan next year to side the house, install new windows and first and foremost to put a new roof on the house. He added that he would like to also check into the cost of making our back deck/porch into a four season porch, but that it wasn't necessary - just a dream.
Next July the only debt we will have is my car payment and our mortgage. Since interest rates are very low, this could be a good choice for us to make. But is it?
Here is what is going into our decision making process:
1. Our house is old and the wood siding on it is over 130 years old which means it is not holding paint very well, the house is not insulated very well and the downstairs has the original windows. We will be living in this house until they carry us out of it either on a stretcher to a nursing home or to a funeral home. My DH and I know that we cannot continue to paint the house on our own and that it is a goal of ours to have the house sided. Couple that with new windows and I know that our monthly utility bill would be greatly reduced. The value of the house would increase but that is not the primary factor. The primary reason to do this would be for ease of upkeep and lower utility bills, especially in our retirement years.
2. I've already touched on this one - we plan to continue to live in this house through our retirement years. Many times people will renovate their home to increase the value hoping to make a killing when they go to sell it. Unfortunately when the housing bubble burst many people found themselves stuck with a house that had beautiful renovations, but they were upside down in the mortgage. We buy a house and live in it. Yes, it is an investment but any renovations we make to the house are renovations that we want done so that we can enjoy living in the house. For example, a four season porch does not add a lot of value to a house in our area of the country, but if we can afford it, we would enjoy it for years.
3. We will be taking on new debt but our mortgage payment is very low. We could afford a second loan payment next year. A big push to have this done is we know that we would have to obtain a loan whenever we take on this project and interest rates are low and should continue to be low one year from now.
4. We will not go overboard. If it will cost a lot to do what we would like to do to this house, then we will not make renovations and in 3 or 4 years when the economy rebounds, we will sell it and buy a house that has new windows and siding. We will not over extend ourselves and get carried away just because interest rates are low and we are able to get a loan. A loan is just what it is – borrowed money – and is not “found” money.
5. If we take out a loan, then we will not be able to hire out any remodeling projects for the inside of the house. We will be doing a lot of DIY projects. When we talked about those projects, I made a mental list and realized that we can do the majority of the projects ourselves. It’s a trade off.
6. Should we even be thinking about this in light of the economy and unemployment being high? This is a very tough question. It’s a gamble. While my DH’s job appears to be safe, I cannot say that with 100% assurance. Who can? How did I settle this question? I didn’t. This is just one of those unknowns with a risk to it. I have no idea what the future holds, but since we will not face getting a loan until next year, we have plenty of time to think this over and in time we will see where the economy is heading. If we reach next summer and we are a little uncomfortable in getting a loan, then we will wait.
7. Let’s also bring into the discussion this point. I could go back to work and earn the money over the next year to pay for these projects and we wouldn’t need a loan. Yes, I thought of this. When I brought up the possibility of my looking for a job, my DH made a comment to me “Your job is to take care of us.” Ten years ago I would have been hopping mad at him for making that comment. Today our lives have changed so much for the better with my being a SAHW/SAHM that we are not willing to give that up, nor should we. After one year we have become accustomed to one income living and even though some months we have some financial challenges, we are making it.
Is it frugal to take out a loan? In looking at our situation I know that since we will need to take out a loan to complete these projects, it is better to take one out when interest rates are low IF we can afford it. If interest rates are low and we can't afford a loan, then it does not make sense to take on the added debt. We have to look at the total loan amount and not just at the payment.
Thankfully we have a year to think this through and make the best decision for our family.