401K Loans

[Rukh O'Rorke]

Nov 8, 2023 19:13:59 GMT -5 minnesotapaintlady said:

Signed a contract for steel with the soffit and fascia and the garage doors and added composite material around my garage doors and shutters, for another $1400 or so.  He told me to think long and hard about replacing my front door as well, but it will be spendy.  At least 5-6K.  I am going to find someone to sand the small rust spots and paint it instead.  It has never been painted, it was always just primed since it was built.

Unlike the other guy that wanted half down with the contract, this guy just wanted $1000.  He said after the new year (taxes), he'll ask for another 10K to bring the down payment to 25%.  The rest is due when the job is done.

good luck!

[minnesotapaintlady]

Nov 9, 2023 22:58:19 GMT -5 Rukh O'Rorke said:

Nov 8, 2023 19:13:59 GMT -5 minnesotapaintlady said:

Signed a contract for steel with the soffit and fascia and the garage doors and added composite material around my garage doors and shutters, for another $1400 or so.  He told me to think long and hard about replacing my front door as well, but it will be spendy.  At least 5-6K.  I am going to find someone to sand the small rust spots and paint it instead.  It has never been painted, it was always just primed since it was built.

Unlike the other guy that wanted half down with the contract, this guy just wanted $1000.  He said after the new year (taxes), he'll ask for another 10K to bring the down payment to 25%.  The rest is due when the job is done.

good luck!

Yeah, now I just need to figure out how to come up with 45-50K by next June.    I want to just expand my HELOC, but I'm hearing now I'd have to pay for another appraisal which makes that a little less attractive.  I emailed the credit union this morning to find out if it has to have a full scale mortgage type appraisal. I'm only asking for 50K and Zillow and Trulia have me at over 400K in equity.  Even if you cut that by 75% I still have plenty of equity to cover a 50K HELOC.

[Rukh O'Rorke]

Nov 10, 2023 9:36:40 GMT -5 minnesotapaintlady said:

Nov 9, 2023 22:58:19 GMT -5 Rukh O'Rorke said:

good luck!

Yeah, now I just need to figure out how to come up with 45-50K by next June.    I want to just expand my HELOC, but I'm hearing now I'd have to pay for another appraisal which makes that a little less attractive.  I emailed the credit union this morning to find out if it has to have a full scale mortgage type appraisal. I'm only asking for 50K and Zillow and Trulia have me at over 400K in equity.  Even if you cut that by 75% I still have plenty of equity to cover a 50K HELOC.

Yuk! how much would an appraisal cost?

I need to think more about sinking funds for myself, too.

[minnesotapaintlady]

Nov 10, 2023 13:57:11 GMT -5 Rukh O'Rorke said:

Nov 10, 2023 9:36:40 GMT -5 minnesotapaintlady said:

Yeah, now I just need to figure out how to come up with 45-50K by next June.    I want to just expand my HELOC, but I'm hearing now I'd have to pay for another appraisal which makes that a little less attractive.  I emailed the credit union this morning to find out if it has to have a full scale mortgage type appraisal. I'm only asking for 50K and Zillow and Trulia have me at over 400K in equity.  Even if you cut that by 75% I still have plenty of equity to cover a 50K HELOC.

Yuk! how much would an appraisal cost?

I need to think more about sinking funds for myself, too.

$350-$400.  More than I'd be willing to pay to add 20K to my LOC.  Still waiting for someone to call me back from the mortgage department.  If they can't waive the appraisal I don't think I'll bother expanding the HELOC. 

[minnesotapaintlady]

I love my credit union.  They pulled up my tax assessment for my house and said they'd just use that.  She's like, "um, you only have a 73K mortgage...we have lots and lots of room here".  Maybe I should apply for a 250K HELOC?

They're also giving me a lower rate of 6.4% for the first 12 months, instead of the current 8.5%. 

[Rukh O'Rorke]

awesome MPL!!

[finnime]

That's great, minnesotapaintlady. Sounds like a solid solution all around. Beats the pants off a 401k loan.

[TheOtherMe]

I would hope my credit union would do the same.  If they would use the assessment that I pay property taxes on, I have so much equity in this house.  My mortgage holder keeps sending snail mail to refinance and get cash out.  Why would I give up a 3% loan to do that and I don't want cash out at my ag ie.

I can cash flow the vinyl plank flooring I hope to put in my bedroom once the CD that is maturing on November 25 is available to use.  

I could not believe when I talked to the credit union about what I want done with the CD, if I had not told them what I wanted, it would have rolled over at the same interest rate as it earns now.  Current rates are double that.

[jerseygirl]

Yes banks rely on CD holders just rolling over without attention

[minnesotapaintlady]

I initiated the application for a 60K HELOC.  I was tempted to just get a huge one that would cover anything I could ever possibly want to do to the house, but decided 60K is the most I'd ever want to be in debt anyhow...of course now I'm thinking it would be nice to have a big line to use as a down payment on a new place someday so I don't have to put in offers with contingency.  Meh.  There's always the 401K loan. 

[minnesotapaintlady]

The HELOC closed today, they said it would take about a month, but it's only been 8 days. 

I'm kicking myself for not just taking a huge line as it would have cost the same no matter how big the limit.  I had forgotten about all the mandatory closing costs in my state, so it cost me $348.   Last time they were running a special where they covered $150 of it and she told me over the phone last week it would be just a "couple hundred or so" so I didn't think much of it.  She's like "don't worry, it's just coming out of your available loan proceeds, so when it funds you'll see you just have a $59,652 amount instead of $60,000."  Ok...that sounds great, but I'm assuming I still need to actually pay this?  "Oh, it just becomes part of your loan draw and you only have to pay interest on it with your first payment which isn't until Jan 15th, but if you want to pay it all off then you can". 

She looked to be about 23 and I was feeling like the old curmudgeon wanting to just write a check to cover it immediately, but I guess I'll just do that in January (minus the check part)

[Rukh O'Rorke]

Nov 21, 2023 13:15:35 GMT -5 minnesotapaintlady said:

The HELOC closed today, they said it would take about a month, but it's only been 8 days. 

I'm kicking myself for not just taking a huge line as it would have cost the same no matter how big the limit.  I had forgotten about all the mandatory closing costs in my state, so it cost me $348.   Last time they were running a special where they covered $150 of it and she told me over the phone last week it would be just a "couple hundred or so" so I didn't think much of it.  She's like "don't worry, it's just coming out of your available loan proceeds, so when it funds you'll see you just have a $59,652 amount instead of $60,000."  Ok...that sounds great, but I'm assuming I still need to actually pay this?  "Oh, it just becomes part of your loan draw and you only have to pay interest on it with your first payment which isn't until Jan 15th, but if you want to pay it all off then you can". 

She looked to be about 23 and I was feeling like the old curmudgeon wanting to just write a check to cover it immediately, but I guess I'll just do that in January (minus the check part)

oh well! It's done and time to get your house niced up!!

[minnesotapaintlady]

Nov 21, 2023 17:44:23 GMT -5 Rukh O'Rorke said:

Nov 21, 2023 13:15:35 GMT -5 minnesotapaintlady said:

The HELOC closed today, they said it would take about a month, but it's only been 8 days. 

I'm kicking myself for not just taking a huge line as it would have cost the same no matter how big the limit.  I had forgotten about all the mandatory closing costs in my state, so it cost me $348.   Last time they were running a special where they covered $150 of it and she told me over the phone last week it would be just a "couple hundred or so" so I didn't think much of it.  She's like "don't worry, it's just coming out of your available loan proceeds, so when it funds you'll see you just have a $59,652 amount instead of $60,000."  Ok...that sounds great, but I'm assuming I still need to actually pay this?  "Oh, it just becomes part of your loan draw and you only have to pay interest on it with your first payment which isn't until Jan 15th, but if you want to pay it all off then you can". 

She looked to be about 23 and I was feeling like the old curmudgeon wanting to just write a check to cover it immediately, but I guess I'll just do that in January (minus the check part)

oh well! It's done and time to get your house niced up!!

Well, I do have 3 days to back out.  Part of me is thinking, "To save $350 I can make that 30K line over 2 years work". 

Just another reminder of how much I hate borrowing money.  It's expensive!

[minnesotapaintlady]

So after all this of setting up the HELOC, I ran it by the Bogleheads and they're telling me to go with the 401K loan. 

[haapai]

Can you share their logic with us?  Do those folks grock your financial situation or is that just boilerplate advice? 

[minnesotapaintlady]

Jan 24, 2024 9:54:39 GMT -5 haapai said:

Can you share their logic with us?  Do those folks grock your financial situation or is that just boilerplate advice? 

I will go with the higher $34k figure. $34k principal, at 9.5% interest rate, for 60 months, with a fixed origination cost of $295 (5 years * $50 per year + $95), you will need to pay $715 per month. Total interest paid = $8,844 (to yourself). But net cost is only 25% of this, as before (future tax cost) = $2,211.

www.calculator.net/auto-loan-ca ... loanresult

Same $34k principal, at 8.5% interest rate, same 60 months term, no origination costs, you will need to pay $698 per month, and total interest paid = $7,854. But this $7,854 is gone into thin air ... you will never see even a dime of it back.

In either case you will have to come up with $30 (HELOC) to $50 (401k loan) extra per month than the Roth contribution you are making per year and will be ceasing until the loan is paid off.

My recommendation is to double down on my earlier recommendation -- do NOT cut down on the 401(k) contributions, but if you can't make both the Roth IRA and the loan payment, give up the Roth contribution.

[haapai]

deleted by author

[Rukh O'Rorke]

Jan 24, 2024 9:51:09 GMT -5 minnesotapaintlady said:

So after all this of setting up the HELOC, I ran it by the Bogleheads and they're telling me to go with the 401K loan. 

pfft! yes - right after you put 50% of your retirements into bonds......

They don't understand finances at the YM level I think. 

[minnesotapaintlady]

Jan 24, 2024 11:13:17 GMT -5 Rukh O'Rorke said:

Jan 24, 2024 9:51:09 GMT -5 minnesotapaintlady said:

So after all this of setting up the HELOC, I ran it by the Bogleheads and they're telling me to go with the 401K loan. 

pfft! yes - right after you put 50% of your retirements into bonds......

They don't understand finances at the YM level I think. 

But, I want to be at their level. 

[Rukh O'Rorke]

Jan 24, 2024 11:29:58 GMT -5 minnesotapaintlady said:

Jan 24, 2024 11:13:17 GMT -5 Rukh O'Rorke said:

pfft! yes - right after you put 50% of your retirements into bonds......

They don't understand finances at the YM level I think. 

But, I want to be at their level. 

[Rukh O'Rorke]

we all do!