Financing Home Improvement

2,870 Views | 20 Replies | Last: 7 mo ago by OldArmyCT
MASAXET
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8:24a, 5/19/25
AG
I would like to build an outdoor living space for my home and I intend to take a loan. Any suggestions on best long term financial plan with lowest interest rates? Project will be around $175-200k and we intend to live in the house for the next 15-20 years.

Would be curious if I can shop for an HELOC with banks or if it's more expensive to finance with the GC company.
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Maximus Johnson
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8:26a, 5/19/25
AG
Following
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cgh1999
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8:32a, 5/19/25
AG
Frost Bank has always been the go to for pools and other home improvement.
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mosdefn14
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9:31a, 5/19/25
AG
Home improvement and HELOCs are gonna be in the 8% range right now. That'll be fun. Not deductible under current tax law either unless it's a Cash-out refi, which goes to my next point.

Make sure you understand what type of lien it is. In Texas you can only have one "equity" mortgage at a time. This includes HELOC and Cash-out refi. Understand if you'll get yourself in a spot where you cannot get a HELOC in the future until the other note is paid off.
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MASAXET
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In reply to mosdefn14 • 10:01a, 5/19/25
AG
Like the housing market, do you think interest rates for HELOC will go down in the near future? I feel like interest rates in general will never be as low as it once was 5-10 years ago.
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Sims
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10:17a, 5/19/25
AG
Don't know what your professional situation looks like but something that has worked for me in the past is to speak with our commercial bank partners about business on the personal side.

A couple of our banks are very willing to do personal business with our management team. De-risks them a bit since they are very familiar with the corporate results and projections. May not necessarily swing rates in an appreciable way but the underwriting is smoother because of the quasi pre-existing relationship.
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Corps_Ag12
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In reply to cgh1999 • 12:05p, 5/19/25
AG
cgh1999 said:
Frost Bank has always been the go to for pools and other home improvement.

This.

I build pools & outdoor living and am lucky enough to have a great relationship with a Frost branch VP. I've referred multiple clients to Frost and had great success with them getting approved. They seem to have better rates that Hearth, Lyon, etc. but do take longer to close (typically 1 month right now he said but that could be just his volume at the moment).
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BMach
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In reply to Corps_Ag12 • 2:35p, 5/19/25
AG
Corps_Ag12 said:
cgh1999 said:
Frost Bank has always been the go to for pools and other home improvement.

This.

I build pools & outdoor living and am lucky enough to have a great relationship with a Frost branch VP. I've referred multiple clients to Frost and had great success with them getting approved. They seem to have better rates that Hearth, Lyon, etc. but do take longer to close (typically 1 month right now he said but that could be just his volume at the moment).


I just closed a Frost loan to build my pool about 5 months ago in a week from start to close
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I bleed maroon
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2:38p, 5/19/25
AG
Check out your local credit unions, as well. I have been getting decent unsolicited rate offers from Austin Telco Credit Union in Austin. They are usually pretty competitive, and have decent turnaround times, I think.
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Malibu
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9:14p, 5/19/25
Might be an unpoplar opinion based on my own conservative approach to personal debt, but I would advise pay cash or defer until you can, unless this is a short term bridge to a near certain liquidity event. You're locking in a big monthly payment and betting the downs of the ups and downs of financial life wont hit at exactly the wrong time.
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SteveBott
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9:34p, 5/19/25
AG
The biggest difference in Home Improvement loans and HELOC/Cash Out is LTV limits. Cash outs are limited to 80% of LTV. HI are not restricted until 95% and the value of the improvements go towards the LTV.

Rates and terms are similar, estimated at 7.25-7.5%.

CO you do the loan and are free to manage as you wish. HI need more bank involvement and will administer the loan to your proposed plans. No way to tell you what you need without detailed information on the current house LTV and plan.

I have used this company for both but Frost is a good option as well. I could offer a more definitive answer if you want to discuss. My contact info is in my profile. I do not offer either loan at this time.

https://www.certifiedfunding.net
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I bleed maroon
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In reply to Malibu • 9:42p, 5/19/25
AG
Malibu said:
Might be an unpoplar opinion based on my own conservative approach to personal debt, but I would advise pay cash or defer until you can, unless this is a short term bridge to a near certain liquidity event. You're locking in a big monthly payment and betting the downs of the ups and downs of financial life wont hit at exactly the wrong time.
You're "right", of course, from an economic and fiscal perspective, BUT...

There is something I like to think of as the theory of reasonableness. Given your current finances, your future prospects, and a bit of a safety net, how do you want to live? Living in a cardboard box and feeding your children out of dumpsters would clearly help your budget and build more wealth, but at some point, you have to live your life. Be reasonable, spend money where you spend the most time, and don't stretch too far. That's about as good as most people can hope for.

In this situation (which I have also found myself in, although it's been a while), the alternative might be to go buy a bigger house with more amenities, and "waste" more money on transaction fees and upgrades. Refreshing your existing home might be a more economical outcome, even if a modest amount of additional temporary debt is taken on to get it.

Just a counterpoint to your well-reasoned and disciplined approach.
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jja79
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10:08p, 5/19/25
AG
I've been retired almost a year so something might have changed but Frost always had the most borrower friendly LTV calculation on improvement loans. I still get calls and believe both Amegy and Bank of Texas have HELOC promos going on now. The benefit if you can qualify with the 80% LTV is no closing costs, interest only payments and control over how the money is spent.
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Malibu
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In reply to I bleed maroon • 9:42a, 5/20/25
I hear you and agree with you about the theory of reasonableness. We should enjoy life while we're living it. This is a public forum and one purpose of adding my two cents isn't that the OP definitely shouldn't do this (I know absolutely nothing about their financial situation), but that a recognition that there are many readers and $200k is a lot of money for the average HH income.

In my neighborhood, I see lots of nice cars, home upgrades, and really cool backyard amenities. Nicer than mine. I want a lot of those things too, and there is a sense of FOMO. However, when you start talking to the neighbors about real life stuff, they admit that they're leveraged and stressed out living paycheck to paycheck. I have more daily peace in my life than they do. Not at all saying that's the OPs situation, but definitely is the situation of many readers who may also think "a backyard pool and cold plunge would be nice and wow, there's a bank that will let me do it" who should not be making that choice.

With these major life purchases that may take years or decades to pay off, they have to be weighed against opportunity cost of what other luxuries are off the table, like vacations, cars, other toys. And I would certainly make an austerity single income essentials only budget, and if the note can be comfortably paid on that budget, and you're at peace with the opportunity costs, Godspeed.
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Maximus Johnson
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In reply to Malibu • 10:44a, 5/20/25
AG
I have the same general philosophy on personal finance as you. I am not trying to poke holes in your argument, but would like to get your take on my situation since we have the same thoughts here:

I bought my house 1 year out of college in 2020 and secured a 2.25% interest rate. Since 2020, my household income has tripled. Our family size has also tripled. We need more house but like our location and dont want to move. I could essentially double the size of my house for 200K, keep the first mortgage at the low rate and the first lien at 7% or whatever the rates are when I pull the trigger and average out to around 4.5% which is much better than I can do in the market today.

Financing aside, we need more house, we can now afford more house and if all things were equal we would be back in the house market.
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Malibu
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In reply to Maximus Johnson • 1:16p, 5/20/25
It sounds like that's a major quality of life issue and your only other option is moving to a bigger house around the same area. You've probably already done this but you need a house no matter what. Can you sell and use the crazy 2020-2025 equity gain to get you the bigger 'forever' house with amenities you like and debt service you can responsibly float on an austerity budget or is the extension the better move?

In broad generalities, if a house extension is the better move for your situation, in a personal SHTF situation the extension should add sqft and room count and the built in equity of the project > project cost.
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Diggity
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In reply to Malibu • 1:22p, 5/20/25
AG
Malibu said:
It sounds like that's a major quality of life issue and your only other option is moving to a bigger house around the same area. You've probably already done this but you need a house no matter what. Can you sell and use the crazy 2020-2025 equity gain to get you the bigger 'forever' house with amenities you like and debt service you can responsibly float on an austerity budget or is the extension the better move?

In broad generalities, if a house extension is the better move for your situation, in a personal SHTF situation the extension should add sqft and room count and the built in equity of the project > project cost.
presumably, any other home in the area would have a similar runup.

If you can truly double your usable space for that amount of money, I think it's a no brainer in your situation.
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I bleed maroon
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In reply to Diggity • 3:05p, 5/20/25
AG
Diggity said:
Malibu said:
It sounds like that's a major quality of life issue and your only other option is moving to a bigger house around the same area. You've probably already done this but you need a house no matter what. Can you sell and use the crazy 2020-2025 equity gain to get you the bigger 'forever' house with amenities you like and debt service you can responsibly float on an austerity budget or is the extension the better move?

In broad generalities, if a house extension is the better move for your situation, in a personal SHTF situation the extension should add sqft and room count and the built in equity of the project > project cost.
presumably, any other home in the area would have a similar runup.

If you can truly double your usable space for that amount of money, I think it's a no brainer in your situation.
Generally agree. The one caveat that leaps to my mind is that you may or may not be harming yourself on resale. If you have the only $600k house in a $300-400k neighborhood, you may not get your money back out of the project as easily when you sell. You actually might be better off selling the house, and buying a $600k house in an $800-900k neighborhood (I usually see houses at the lower end of a neighborhood appreciate more, percentage-wise). Conversely, an optioned-up home can "show" better, and might sell more quickly in a hot market (which we're definitely not in at the moment).
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Diggity
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In reply to I bleed maroon • 3:07p, 5/20/25
AG
that's a good point. Assuming there's a loan involved, I imagine the bank would insist on doing that diligence as well.
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10andBOUNCE
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In reply to MASAXET • 4:44p, 5/20/25
AG
MASAXET said:
Project will be around $175-200k and we intend to live in the house for the next 15-20 years.
I would be curious what % this $200k is of your home value. Maybe I missed it. I am guessing this is a $800K+ home based on that kind of backyard project? Guessing household income is at least $250k +...?

Secondly, we all have plans of living in our homes for decades and I would guess very few make it that long. So, I wouldn't base your decision on needing to be in the home that long. Make the decision based on being in the home for 5 more years - is it still a good move?

I echo Malibu in general. $200k seems like a huge project, especially financed at 7-8%. If you clear a healthy income each month after expenses and can afford the big loan payment, have a good amount of cash on hand (rainy day fund), etc. who am I to say don't do it. But that is not my style with how we behave financially; hence why its called personal finance.
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OldArmyCT
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4:58p, 5/20/25
AG
Have you considered a margin loan on your brokerage account?
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