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Old 09-20-2013, 08:35 AM
 
429 posts, read 739,350 times
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Is the general consensus that even if you can afford a mortgage and some savings per month, that you're over-extended if you also can't afford to extensively update/renovate the home (in cash)? I'm confused about what is reasonably expected of today's Long Islanders.

I'm asking, because we just purchased our first home in July in Bethpage. The house is not extremely up-to-date (ie: we don't have granite counters, stainless steel appliances, ceramic tile floors, etc.). The house is livable and comfortable for us, but there are definite updates that can/should be done.

We intend to pay for any updates/renovations in cash. We always intended for our only debt to be the mortgage (I paid off my student loans before buying the house). We have 6 months' living expenses saved up as an "emergency fund" in case the worst-case scenario were to ever arise: one or both of us losing our jobs. That money is not for updates/renovations.

This means that based on how much we're currently able to save per month, it'd take us around 5 years to save up for a major renovation, like a kitchen, for example. We do expect our earning potential to increase, but of course, we didn't buy a house based on that expectation.

I guess I just wonder - is it a common expectation that people in middle class areas (not Manhasset) take out equity loans to pay for their renovations? Or are people really taking the time to save up for these renovations? I know everyone's situation is different, but I'm just wondering what is common on LI these days.
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Old 09-20-2013, 08:41 AM
 
236 posts, read 420,525 times
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Quote:
Originally Posted by csteen85 View Post
Is the general consensus that even if you can afford a mortgage and some savings per month, that you're over-extended if you also can't afford to extensively update/renovate the home (in cash)? I'm confused about what is reasonably expected of today's Long Islanders.

I'm asking, because we just purchased our first home in July in Bethpage. The house is not extremely up-to-date (ie: we don't have granite counters, stainless steel appliances, ceramic tile floors, etc.). The house is livable and comfortable for us, but there are definite updates that can/should be done.

We intend to pay for any updates/renovations in cash. We always intended for our only debt to be the mortgage (I paid off my student loans before buying the house). We have 6 months' living expenses saved up as an "emergency fund" in case the worst-case scenario were to ever arise: one or both of us losing our jobs. That money is not for updates/renovations.

This means that based on how much we're currently able to save per month, it'd take us around 5 years to save up for a major renovation, like a kitchen, for example. We do expect our earning potential to increase, but of course, we didn't buy a house based on that expectation.

I guess I just wonder - is it a common expectation that people in middle class areas (not Manhasset) take out equity loans to pay for their renovations? Or are people really taking the time to save up for these renovations? I know everyone's situation is different, but I'm just wondering what is common on LI these days.
Unless there are major issues that need to be addressed immediately, a major renovation like a kitchen should be treated as a luxury expense. However, it seems to me that most people don't view it that way, and instead treat it as a necessity that requires substantial borrowing.
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Old 09-20-2013, 08:48 AM
 
855 posts, read 1,630,077 times
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This is what I was trying to explain to you when you were concerned about buying a mattress to fit in your future dormered home. It is hard to save up for retirement, college, cars, life. To save up for major remodeling is an extremely hard task unless you are making serious money. From your previous posts the stats you put up in terms of salary to debt I wouldn't have the guts to pull the trigger.

In my case I bought before the boom and gained alot of equity. I decided in 2010 to knock my small house down and a rebuild mostly on equity. Id say a majority of the homeowners that dormered during the boom did so on home equity loans.
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Old 09-20-2013, 08:57 AM
 
429 posts, read 739,350 times
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Originally Posted by Galicia#1 View Post
This is what I was trying to explain to you when you were concerned about buying a mattress to fit in your future dormered home. It is hard to save up for retirement, college, cars, life. To save up for major remodeling is an extremely hard task unless you are making serious money. From your previous posts the stats you put up in terms of salary to debt I wouldn't have the guts to pull the trigger.

In my case I bought before the boom and gained alot of equity. I decided in 2010 to knock my small house down and a rebuild mostly on equity. Id say a majority of the homeowners that dormered during the boom did so on home equity loans.
Thanks for the insight. I'm not sure which previous post of mine you're referring to, but the only debt we have is the mortgage and the payment is less than 30% of our gross income. It's actually closer to 25%. In your view, this is irresponsible borrowing, where you "wouldn't have the guts to pull the trigger?"
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Old 09-20-2013, 09:06 AM
 
192 posts, read 320,370 times
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I don't really have any "expectations" about how other people should fund their renovations. My husband and I bought a house that is probably similar to yours -- its in good shape but not very updated. All the work we've done to the house we've paid for with cash. We plan to continue to do the same. The only exception might be if a contractor offers 0% interest financing, but even then, we'd make the payments with cash on hand and wouldn't borrow.

I'm sure other people can justify borrowing to pay for these things. This is just what works for us. I pay off my credit cards in full each month and hate the idea of owing money.
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Old 09-20-2013, 09:11 AM
 
Location: Long Island, NY
1,775 posts, read 3,390,905 times
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From what I've seen, people are basically taking out HELOCs to finance major home renovations. Redoing a kitchen sounds like a major renovation - at least $10K or more depending on how extensive the work is. Most financially strapped homeowners don't have $10-50K or more sitting in liquid cash to do these projects, and IF they do, they would rather invest it or stick into a 529 plan or some other expense instead of into a home reno. Its really about priorities.

The SMART thing to do would be to pay for the renovations in cash - after saving up for it, or using windfalls from other sources (ie bonuses from work). The smart thing to do is to do renovations little by little over time, and not all at once so you don't get stuck with a whopping $20K+ bill after the work is done. My parents are constantly doing updates on their 3 bedroom colonial . They just re-did the flooring in the 2nd floor hallway and it cost around $600 which they had saved up for a few months. Their next step is to replace the bathroom vanity because its been there for 25 years and shows chipping/wear and tear on corners. Thats another expense they plan to budget for, but over the span of 8 months - they have completed lots of little projects here and there. In the span of 2 years, they've already re-stained the kitchen hard wood floors, changed the carpeting in the upstairs bathrooms, changed the bathroom floor tile, replaced a couch in the basement area.

Also, don't understimate how cheaper it is to do the work yourself. After Sandy flooded our basement, my husband and I basically redid the entire basement floor by ourselves w/ only contractors coming in to install drywall and electrical wiring. We got tiles for around $300 at Lowes, bought the compoud mix, materials and dedicated about 4 weekends to do the job. What costs a lot of $$ was the electrical work (re-wiring our entire house since the circuits and wiring were all corroded due to standing water), sheetrock (although we could have cheapened out and done this ourselves, my husband was physically exhausted from having done it already after Hurricane Irene and needed a break); and replacing all the appliances. FEMA basically paid for the outside contractors to complete those projects. We did the painting and the flooring. By doing it ourselves, we probably saved a good $1,000+.

I still see many houses that have never been updated, with kitchens and bathrooms that look straight out of a TV set from The Jeffersons or Brady Bunch. Some people, believe it or not, don't even care (my husband would be one of them if it weren't for my nagging, his philosophy being 'if it ain't broke, why fix it?'). I would bet that many people who are expending lots of $$ on major home renovations like replacing entire kitchen/bathroom fixtures or installing wiring systems/lighting, etc are those who either plan to list the house for sale in the immediate future, or plan to 'get it out of the way' before kids arrive or need more space.
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Old 09-20-2013, 09:13 AM
 
Location: under the beautiful Carolina blue
20,026 posts, read 29,862,228 times
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Quote:
Originally Posted by sneakyvegan View Post
I don't really have any "expectations" about how other people should fund their renovations. .
Yes I'm confused by the premise of the question. Why would you be worried about other peoples' expectations? You're either experiencing buyer's remorse (very common after first home purchase) or you're overly worried about what others think of your new home. I don't have any expectations for what others do with their houses. I don't really understand the premise, honestly.
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Old 09-20-2013, 09:53 AM
 
429 posts, read 739,350 times
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Quote:
Originally Posted by twingles View Post
Yes I'm confused by the premise of the question. Why would you be worried about other peoples' expectations? You're either experiencing buyer's remorse (very common after first home purchase) or you're overly worried about what others think of your new home. I don't have any expectations for what others do with their houses. I don't really understand the premise, honestly.
I don't have buyer's remorse, nor am I overly worried about what others think of our home. My question (and perhaps I could have phrased it differently) was how do homeowners on Long Island typically finance home renovations? I guess using "expectations" was poor phrasing on my part, but I was trying to put it in the perspective of current economic conditions.

As I stated earlier, we're very happy here. We realize that things will need to be done to update it, which will in turn increase value, but they don't need to be done in order to live here. We replaced a toilet, because it was cracked. Not because it was pink. We didn't gut the whole bathroom, because aside from the fact that it's pink and yellow, there's nothing functionally wrong with it.

I was just asking how people were typically financing their updates these days, that's all.
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Old 09-20-2013, 10:00 AM
 
855 posts, read 1,630,077 times
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Originally Posted by csteen85 View Post
Thanks for the insight. I'm not sure which previous post of mine you're referring to, but the only debt we have is the mortgage and the payment is less than 30% of our gross income. It's actually closer to 25%. In your view, this is irresponsible borrowing, where you "wouldn't have the guts to pull the trigger?"
The stats I am referring to are 400k house on a dual 100k income putting down under 20%. I'm not saying it's irresponsible but, I wouldn't be comfortable doing so.

IMO the house you live in has as much to do with ones QOL as anything. Most people I have encountered on CDLI would pick the better school district over the better house. I don't understand that point of view myself but, apparently I am in the minority.
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Old 09-20-2013, 10:08 AM
 
429 posts, read 739,350 times
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Quote:
Originally Posted by Galicia#1 View Post
The stats I am referring to are 400k house on a dual 100k income putting down under 20%. I'm not saying it's irresponsible but, I wouldn't be comfortable doing so.

IMO the house you live in has as much to do with ones QOL as anything. Most people I have encountered on CDLI would pick the better school district over the better house. I don't understand that point of view myself but, apparently I am in the minority.
Just to clarify, the house was not $400k and we are over $100k combined income. But I understand your perspective.
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