Profile picture for Help Me Please

Is it smart to take out a equity line of credit to renovate your house?

My bank, Wells Fargo, has a pre-payment penalty, if I want to pay it back sooner than 3 years.
  • April 05 2010 - La Jolla
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Answers (4)

Profile picture for RichardMCombs
It would be much smarter to save up and pay cash!  Unfortunately this is not a reality for many people.

Would it be possible to do the remodel in stages and pay down the debt before moving to the next stage?  Try the kitchen for example, remodel this area and pay it off in 2-3 years.  Then move on to the next project.

You will recoup some of the money back in resale when you decide to sell but do not count on getting much for the efforts. 

Good Luck!!
  • June 20 2011
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I wouldn't recommend it, unless you are in desperate need to do repairs.
  • April 28 2010
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Profile picture for mp02835
i work for a local bank here in RI, home eqity Lines are good, but just becareful of the rate.... it adjusts with prime witch changes. So if you do get one make sure you pay extra when you can and the moment you feel the payments are high enough for you move it into a fixed product
  • April 07 2010
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While the term "other people's money" gets over used, it hold true if you correctly arbitrage (borrowing money and making a profit over your interest paid.)

From an investment standpoint, renovating can yield returns. However, the main reason people do it is to simply enjoy their house more.

If you're going to do it, just know that the returns (depending on what you do) can be similar to buying a plasma TV and it IS a loan that has to be repaid.
  • April 06 2010
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