Biker_on_FIRE
Dryer sheet wannabe
Hi everyone, I need some advice/suggestions on whether or not to do a cash-out refi to finance a home remodel. Here are some of the particulars of our situation:
Wife and I are 51 years old and plan to retire in 2025 when have penalty-free withdrawals from our company 401ks
$4.5M in retirement accounts (Roth and Traditional 401ks and IRAs, 80% equities/20% bonds)
$180K in cash
$200K in Brokerage (equities)
$2M home value
$170K remaining on 15-year mortgage at 3%; term ends July 2027
Annual expenses approx $100K.
We are in dire need of a home remodel...kitchen and bathrooms are falling apart and are in need of an overhaul. Need new roof and want to add solar when we do that. We would like to do it within a year and are looking in the ballpark of $150-200K in remodel/roof/solar costs.
We had originally planned on waiting until we are 55 when we have access to our 401ks without penalty, but with our house falling apart and interest rates so low, we are considering doing a cash-out refi: 15-year at around 2.5% with a loan amount of around $400K. My thinking is that the refi would allow us to do the remodel earlier, smooth out our withdrawals, and not have to deplete our cash (emergency fund) and equities. It would also let us arbitrage the low interest rates and continue to aggressively invest. We are comfortable with extending the term of our mortgage since we have the money in the bank (once we have access at 55), so we could always pay off the loan early if it helps us sleep at night.
Although our jobs are very stable, we would like to keep our cash as an emergency reserve for the next 3.5 years and not rely on the equities in our brokerage account as an emergency fund as we are planning on using that for charitable donations to a donor advised fund. Btw, I have no doubt that overall, we will have plenty to support our retirement in the long term. We have lived frugally and have done well financially because of it, but we're trying to optimize squeezing in the remodel in the short term.
Does this sound like a good plan, or are there any other suggestions/options we should be considering? Should we go with a 4% HELOC? Or home equity loan? Spitball away! Thanks!
Wife and I are 51 years old and plan to retire in 2025 when have penalty-free withdrawals from our company 401ks
$4.5M in retirement accounts (Roth and Traditional 401ks and IRAs, 80% equities/20% bonds)
$180K in cash
$200K in Brokerage (equities)
$2M home value
$170K remaining on 15-year mortgage at 3%; term ends July 2027
Annual expenses approx $100K.
We are in dire need of a home remodel...kitchen and bathrooms are falling apart and are in need of an overhaul. Need new roof and want to add solar when we do that. We would like to do it within a year and are looking in the ballpark of $150-200K in remodel/roof/solar costs.
We had originally planned on waiting until we are 55 when we have access to our 401ks without penalty, but with our house falling apart and interest rates so low, we are considering doing a cash-out refi: 15-year at around 2.5% with a loan amount of around $400K. My thinking is that the refi would allow us to do the remodel earlier, smooth out our withdrawals, and not have to deplete our cash (emergency fund) and equities. It would also let us arbitrage the low interest rates and continue to aggressively invest. We are comfortable with extending the term of our mortgage since we have the money in the bank (once we have access at 55), so we could always pay off the loan early if it helps us sleep at night.
Although our jobs are very stable, we would like to keep our cash as an emergency reserve for the next 3.5 years and not rely on the equities in our brokerage account as an emergency fund as we are planning on using that for charitable donations to a donor advised fund. Btw, I have no doubt that overall, we will have plenty to support our retirement in the long term. We have lived frugally and have done well financially because of it, but we're trying to optimize squeezing in the remodel in the short term.
Does this sound like a good plan, or are there any other suggestions/options we should be considering? Should we go with a 4% HELOC? Or home equity loan? Spitball away! Thanks!