Student Loan/house remodel advice

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AustinCountyAg
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1:31p, 7/3/23
Need some advice on what to pay down. Looking to remodel our kitchen and the quote we got is around the exact same we have left on my wife's student loans (50k). We have the cash with originally the idea of paying them off before payments and interest rates start back up again whenever that may be.

The home equity loan we got quoted for has interest rates currently around 8ish percent. Interest rates in the student loans are locked in around 6.4%.

My brain tells me to pay cash for the remodel and then just pay down the student loans as fast as possible whenever payments begin, but I'm looking to get other opinions.

Or would it be better to pay off the SL first and then pay on the remodel with the hopes interest rates will go down and we can refinance down the road?
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one MEEN Ag
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In reply to AustinCountyAg • 2:11p, 7/3/23
AG
AustinCountyAg said:
Need some advice on what to pay down. Looking to remodel our kitchen and the quote we got is around the exact same we have left on my wife's student loans (50k). We have the cash with originally the idea of paying them off before payments and interest rates start back up again whenever that may be.

The home equity loan we got quoted for has interest rates currently around 8ish percent. Interest rates in the student loans are locked in around 6.4%.

My brain tells me to pay cash for the remodel and then just pay down the student loans as fast as possible whenever payments begin, but I'm looking to get other opinions.

Or would it be better to pay off the SL first and then pay on the remodel with the hopes interest rates will go down and we can refinance down the road?
Whats your payback period on these student loans versus the home loan? If you've got 50k left I assume you're looking at like a 10-15 year payback period remaining. A home equity loan is different than student loans because for HE, you already have the asset. You're just pulling out equity. Technically should expect around 50% of that money to go back into your home equity for a well done kitchen remodel.

Meh. Student loan, home equity loan, mortgage, car payments. Thats a lot of debt you've potentially got. I would recommend trimming your debt before incinerating cash on a home equity loan.

It sounds like you haven't even made payments on this SL debt, so you've just recently acquired the debt during covid.

I would highly recommend you get used to that budget readjustment first before you fire off all of your liquidity on a kitchen. Its not fun to have a beautiful kitchen and you can only eat cheese sandwiches in it.



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AustinCountyAg
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In reply to one MEEN Ag • 2:25p, 7/3/23
one MEEN Ag said:
AustinCountyAg said:
Need some advice on what to pay down. Looking to remodel our kitchen and the quote we got is around the exact same we have left on my wife's student loans (50k). We have the cash with originally the idea of paying them off before payments and interest rates start back up again whenever that may be.

The home equity loan we got quoted for has interest rates currently around 8ish percent. Interest rates in the student loans are locked in around 6.4%.

My brain tells me to pay cash for the remodel and then just pay down the student loans as fast as possible whenever payments begin, but I'm looking to get other opinions.

Or would it be better to pay off the SL first and then pay on the remodel with the hopes interest rates will go down and we can refinance down the road?
Whats your payback period on these student loans versus the home loan? If you've got 50k left I assume you're looking at like a 10-15 year payback period remaining. A home equity loan is different than student loans because for HE, you already have the asset. You're just pulling out equity. Technically should expect around 50% of that money to go back into your home equity for a well done kitchen remodel.

Meh. Student loan, home equity loan, mortgage, car payments. Thats a lot of debt you've potentially got. I would recommend trimming your debt before incinerating cash on a home equity loan.

It sounds like you haven't even made payments on this SL debt, so you've just recently acquired the debt during covid.

I would highly recommend you get used to that budget readjustment first before you fire off all of your liquidity on a kitchen. Its not fun to have a beautiful kitchen and you can only eat cheese sandwiches in it.





The student loans were my wife's before we were married. They were consolidated into a 30 year plan with something like 20 years left. The home equity loan we were quoted for was 15 years. We've paid down prolly around 20k already on her student loans. She didn't get much financial advice growing up and got screwed with them.

Only debt we have is mortgage, one car payment and the student loans.

We have the cash available to pay off her student loans or the remodel. That's the dilemma. Our budget and spending month to month would remain the same regardless.
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500,000ags
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4:21p, 7/3/23
AG
Option 1: Payoff $50k in debt, $50k in cash gone
Option 2: House increases value by $25k, $50k in cash gone

Net worth says option 1.

I think the worst option would be replacing 6% debt with 8% debt (plus transaction fees) - so paying off the student loan debt just to borrow and do the kitchen.
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jwoodmd
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In reply to AustinCountyAg • 5:06p, 7/3/23
You have student loans, yet you want to do a 50k kitchen remodel!?!
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DannyDuberstein
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5:48p, 7/3/23
AG
I would reconsider the remodel, or at least the scope of it. Would not do the HE loan.
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aunuwyn08
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6:25p, 7/3/23
AG
If you get divorced you don't have to do anything with her loan debt, but the kitchen will add value to what settlement you take out of the marriage.
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AustinCountyAg
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In reply to jwoodmd • 6:42p, 7/3/23
jwoodmd said:
You have student loans, yet you want to do a 50k kitchen remodel!?!
trust me I get it. But wife desperately wants it remodeled, and frankly it needs it. Our cabinets don't even close and the oven is original from the house (60's). Drawers aren't on sliders, etc. basically all original from the 60's.

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Ragoo
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7:27p, 7/3/23
AG
What other cash do you have on hand? How long did it take to build the 50k reserve?
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harrierdoc
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In reply to AustinCountyAg • 7:36p, 7/3/23
AG
Tell her to go get a second job and save the money.

Pay off debt and then save more fo the remodel, assuming everything is functional. Oh, and take HGTV ant Pinterest away from her.
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Richierich2323
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8:03p, 7/3/23
Something else to think about that has not been mentioned. You can take the interest from student loans off on your taxes.
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jwoodmd
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In reply to AustinCountyAg • 10:08p, 7/3/23
AustinCountyAg said:
jwoodmd said:
You have student loans, yet you want to do a 50k kitchen remodel!?!
trust me I get it. But wife desperately wants it remodeled, and frankly it needs it. Our cabinets don't even close and the oven is original from the house (60's). Drawers aren't on sliders, etc. basically all original from the 60's.

Trust me I get it. But 50k for a kitchen when you still have student loans. Yes, kitchens are expensive but you couldn't get new appliances and upgraded cabinets for a more modest amount?
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$30,000 Millionaire
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12:45a, 7/4/23
AG
Counter perspective: you only live once and if you're going to get joy from that kitchen remodel, do it.
You don’t trade for money, you trade for freedom.
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$30,000 Millionaire
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12:49a, 7/4/23
AG
There are people in this thread that would tell you to live in a trailer and eat ramen until you paid off all of your debt, and then you could begin to live.

As long as you're not deficit spending and you're saving sufficiently for retirement, do what you want.

Life is about a lot more than just net worth.
You don’t trade for money, you trade for freedom.
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harrierdoc
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In reply to $30,000 Millionaire • 8:02a, 7/4/23
AG
But SHE is the one that brought debt into the marriage, and, per the op, she is the one insisting on spending the money they have to pay for the remodeling. No one is saying don't do the remodel. Just do it in a responsible manner. They had a plan and now, because they have the cash, they (she) wants to ignore the plan they agreed to in order to have better stuff. If the kitchen was so bad, why did they buy the home? My guess is that it was fine until they had the money, and now it's no fun to pay for the debts already incurred, not having to pay 6.4%, but rather, kick the can on down the road, for instant gratification now. It is the mindset of many Americans now, and a huge reason our country is going down the financial gutter. Our leaders reflect the mindset of the voters.

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Pinochet
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In reply to $30,000 Millionaire • 8:16a, 7/4/23
$30,000 Millionaire said:
Counter perspective: you only live once and if you're going to get joy from that kitchen remodel, do it.

Username checks out.
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1Aggie99
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In reply to AustinCountyAg • 9:10a, 7/4/23
AG
ACA,

Your idea seems to work but I would suggest not waiting to pay down SL. Pay cash for remodel and pay whatever additional you can on SL monthly. In the grand scheme of things, you should be able to have a new kitchen and debt free in short order. One thing my wife and I would agree on prior to moving forward... zero new debt until current is paid off.

Get the kitchen (happy wife happy life), live a little tighter and add to principle on SL, and if one of you says something stupid like "hey I sure like that new rover my friend just bought", walk into the kitchen and tell yourselves this is our RR! Also, remind yourselves that only dbags drive RR!!

Haha... best of luck.
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JobSecurity
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10:11a, 7/4/23
AG
Depends entirely on the rest of your finances. If that 50k in loans got her a job that pays really well and you're both maxing 401ks, have plenty of disposal income, and you want to pay the minimum on the loans to prioritize redoing your kitchen I don't think it's the end of the world

The student loan payment is probably ~550/mo? If you have the rest of your **** squared away just do it, BUT if adding another $600+ payment is in any way stressful or causes you to forego other savings then I would reevaluate
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Deputy Travis Junior
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10:21a, 7/4/23
Why don't you do a more modest $20k remodel and put the rest toward the loans? You come out the back end with 30 grand less debt and a much better kitchen (not her dream kitchen, but the loans are hers so tough ****).
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Chipotlemonger
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10:38a, 7/4/23
AG
I would remodel in piece meal fashion. Just get new appliances to start and that will make the biggest difference.
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Philip J Fry
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In reply to $30,000 Millionaire • 11:32a, 7/4/23
AG
$30,000 Millionaire said:
There are people in this thread that would tell you to live in a trailer and eat ramen until you paid off all of your debt, and then you could begin to live.

As long as you're not deficit spending and you're saving sufficiently for retirement, do what you want.

Life is about a lot more than just net worth.


This. I spent a good amount of my 30s with the Dave Ramsey approach. I've learned to loath it and I don't consider him based in reality anymore.
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DannyDuberstein
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11:44a, 7/4/23
AG
Definitely sympathetic to a crap, janky kitchen. I would look at what a decent but budget-friendly version of the project would be for every single component. There's such a wide range that can be spent on each component of the project.
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Deputy Travis Junior
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In reply to Philip J Fry • 11:51a, 7/4/23
I think the David Ramsey approach is for chumps with no self control, but a >6% 20-year 50k loan will generate ~$40k of interest over its life or near double the loan value. Regularly make decisions like that and you'll materially affect your entire financial trajectory for the worse.

OP, There's nothing wrong with wanting to live, but building a River Oaks kitchen when you have $50k of high-ish interest debt outstanding sets off some alarm bells. Now if it only took you 2-4 years to save up that $50k then go for it. Yea you'll pay a little extra interest on the student loans, but whatever. As long as you get to them in the next few years or won't matter. But if it took you all a decade to build up this sum, then realize that this is a bad financial decision and you'd be much better off scaling back your remodel plans to something more within your price range (and you probably wouldn't be asking us if this was a trivial amount of money to you all)
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AustinCountyAg
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12:26p, 7/4/23
Appreciate the comments. Fwiw we pay double the minimum of her student loans so that we can pay them down quicker.
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500,000ags
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1:49p, 7/4/23
AG
Off the subject to an extent, but I really do hate blanket real estate economics in a case like this. You buy a home done to the nines and it's a boatload of $$$. You buy a home that needs work, and you are pissing 50% of your money down the drain because it's a negative ROI when you update.

Part of me thinks the OP should talk to a realtor and see how his home value changes. If the ROI isn't actually negative 50%, but something more reasonable, I think that takes the stink off a decision like this.
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$30,000 Millionaire
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In reply to harrierdoc • 2:31p, 7/4/23
AG
If it was a vacation or a boat, I'd agree with you. A home is an appreciating asset and well, you live in it and use it every day. Life is about balancing competing financial objectives.

Also, a marriage is a partnership. I know so many people that were always 'just 5 years away' from being able to let loose that ended up with tragic endings. I am a big proponent of living responsibly now. Emphasis on the living part.
You don’t trade for money, you trade for freedom.
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$30,000 Millionaire
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2:46p, 7/4/23
AG
Side note: you can only monetize your education once. I certainly would not pay off moderate student loans at the expense of retirement or entering the housing market. The key things with the housing market is that the government heavily incentivizes home ownership and you have to get in. Not getting in, generally, is a catastrophic financial setback.

Side note 2: there is such a huge spectrum of financial responsibility from being a complete spendthrift to being so frugal that you jeopardize your health and well being. I think the goal should be to be in the acceptable middle to wherever your comfort level is. When I meet ardent Dave Ramsey acolytes, my number one question to them is "and then what?" The other reality here is that 90% of americans are way behind the 8 ball on retirement and being able to support themselves when they're no longer able to work. Do you think the government is NOT going to bail them out? Part of me thinks that being financially responsible is the suckers move. It's like the guy in traffic that won't merge, drives on the shoulder all the way to the end, and then gets let in anyway by some nice guy. That's what I think is happening. Yeah, instant gratification and all that, but the legislators in this country are allowing it to happen and they won't stop. Gen Z will not be OK with Gen X starving in the streets.

This is a different question than "is it the right thing to do?", which it is clearly not.
You don’t trade for money, you trade for freedom.
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rononeill
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3:15p, 7/4/23
What's the value of the home?
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CC09LawAg
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In reply to $30,000 Millionaire • 4:55p, 7/4/23
$30,000 Millionaire said:
Part of me thinks that being financially responsible is the suckers move.


I spend way too much time thinking about exactly this.
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harrierdoc
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In reply to $30,000 Millionaire • 4:59p, 7/4/23
AG
I am, by no means a Ramsey follower.

But, it sounds as if the OP's wife is chasing the newest and shiniest thing, rather than following through with the original plan. If this were a health issue, or something that really impacted their healthy living, that is different. This just sounds like someone who cannot stay committed to a pre planned goal.
Granted, all this is just from an internet post. I could be completely off base.
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Philip J Fry
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5:25p, 7/4/23
AG
Why does the original plan matter?
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htxag09
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6:37p, 7/4/23
AG
Did you stop paying your student loans the last few years?

Follow up question because I've genuinely been curious. If you kept paying your student loans the last few years was it basically all interest free?
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one MEEN Ag
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8:09p, 7/4/23
AG
50k remodel means your not lifting a finger and getting top tier finishes. Learn to DIY and tell your wife to pay off her loans.
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AustinCountyAg
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In reply to rononeill • 12:57p, 7/5/23
rononeill said:
What's the value of the home?


Home has increased over $100k in appraisals over past three years.
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AustinCountyAg
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In reply to htxag09 • 1:00p, 7/5/23
htxag09 said:
Did you stop paying your student loans the last few years?

Follow up question because I've generally been curious. If you kept paying your student loans the last few years was it basically all interest free?
we stopped paying but moved the same payment amount to savings since the payment pause. Yes it's interest free. Our thought was to wait in case Biden decided to do some type of forgiveness, and if not just paying off the loans completely before the interest kicked back in. Now with the large sum we've saved we are thinking doing the kitchen remodel instead of paying off the loans. Financially I know it's not the Dave Ramsey idea but our kitchen is trash and well you can't take it with you when you go so may as well enjoy our home….
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