I'm trying to determine what sort of financing I want to use to finish my basement. I have a friend who's a contractor and I can get everything that I want done for $8500. I need to finance this to make it happen though. I've been looking at Home Equity loans and lines of credit but most of them don't look to attractive for such a low amount ( I would borrow maybe 10,000 to cover any additional expenses)after you add fees and closing costs even with the lower interest rates. So I was thinking about using a credit card with a promotional 0% interest rate or something to that effect. I've also explored a personal loan from a local Credit Union and they quoted me 14% on a unsecured personal loan which is high. Any advice on which I should use? Basically, if anyone can break down the advantages/disadvantages of using one versus the other would be appreciated. Thanks!
The interest on a HELOC is deductable. You can apply once, get a significantly large limit, and only use what you need. Should be something like prime -.5 to prime + 1 (depends on total loan to value ... if 1st mortgage + HELOC limit = 80%, the rate are lower ... I've seen deals for up to 120% LTV but the rates can get pretty high (pr+5%). Most banks shouldn't charge you any closing costs - but that's normally for lines of $25k or higher. The idea with LOC is that you don't use it all right now and it becomes available again as you pay it down. A traditional loan would be a 1-time deal. A 0% credit card would be better than tax-deductable interest, but you need to make sure (a) you'd pay it off before the 0% expired and (b) you don't use up all of your available credit. Good luck, mj
I like the idea of a 0% credit card. But, as mj stated it has got to be paid before the rate expires if not your finished basement becomes $10K, instead of $8.5K. Good luck. I am looking at two more years before I even get to touch my basement. Dani
MJ, I must say you always offer extremely helpful advice Dani, I here yah, we have a completely UNFINISHED basement, just walls and dirt LOL, and we eventually want to do it, but it is on the back burner at the moment, but it will get done, when I haven't a clue LOL.
Thanks everyone! I really appreciate the feedback. I was just approved for a BofA Platinum card with a $8100 limit. I think I'll pay now with a 0% offer and let the BOA card sit for a while until the prime for life BT offer rolls in and use that once the 0% runs out.
You're right. HE loans are just not the right option for you for such a low amount. However, banks should NOT charge you any application fees, points, closing costs, etc. At least at Wells Fargo we don't. Most (if not all) Home Equity Lines of Credit are adjustable rates that index to the prime rate. Right now (in California) our HELOC rates are 5.6% with a balance less than $25k. FYI: The only fees with Wells Fargo are: Annual fee of $75 waived the first year. Will continue to be waived if you carry a balance of $20k. Also, there is an origination fee of $500 if you CLOSE the HELOC before the end of 3 years. You can keep a zero balance, just don't close your HELOC before the end of 3 years to avoid the $500 fee. With the HELOC, the interest is still tax deductible for most customers (99.5%). However, the minimum payment is INTEREST ONLY. So, to pay any additional amount, just send in more with your normal payment, make extra payments over the phone, or in a branch, etc.
Hi B-Down Remodeling / Finishing ALWAYS costs more than you think. I am in the process of doing my basement. What does the $8500 get you? Is the framing, electrical and insulation included? Then there is Sheetrock, taping and painting. Plus there are light and electrical fixtures. Trim, staining, painting. New Windows if you are putting them in. Plus there is carpeting costs. Once this is all done you have to consider furnishing costs such as appliances and furniture. I suggest doing the HELOC. The other thing you will achieve is an increased value of your home. Good Luck
It includes everything. (Even painting and carpet). Including finishing the bathroom. (This is a good friend that's why it's so inexpensive). I already have furniture for the basement so that's covered as well. I may check into the Wells Fargo HELOC as it sounds like it may be a good option for me. Once again, thanks for the input!
Mom- Aw, shucks, you're makin' me blush I'm a huge advocate of learning from others' experiences - and sharing what I learn back. This board is an unbelievable resource- thanks to the hundreds (and in George's case, tens of thousands!) of posts. -mj
