OP-lo asked:
I currently have a stash of cash in a money market earning 3.61% APY. I also have a home improvement project set to start later this month. I have enough cash to cover about 40% of the project. I also have a line of credit locked to prime, currently 5.25%. Should I take some of the cash to max out my Roth IRA and thus borrow that much more against the house assuming investments will earn 8% over time – or – should I minimize my home equity debt in the short term. My job situation is good but not great. I am also putting away 5% of my paycheck monthly into a Roth 401K. I have also considered the fact that I could refinance the equity loan into a new 30 yr mortgage after the project. The downside there is that I am currently at 5.25% 5 years in to a 30 yr mortgage. Thanks for your input.
FYI – even if I used 100% of my equity line, I would still have over 100K in equity on my home. I live just west of Chicago. Our housing market here has slowed but notthing like the devaluations of Florida or the west coast.
JARVIS
I currently have a stash of cash in a money market earning 3.61% APY. I also have a home improvement project set to start later this month. I have enough cash to cover about 40% of the project. I also have a line of credit locked to prime, currently 5.25%. Should I take some of the cash to max out my Roth IRA and thus borrow that much more against the house assuming investments will earn 8% over time – or – should I minimize my home equity debt in the short term. My job situation is good but not great. I am also putting away 5% of my paycheck monthly into a Roth 401K. I have also considered the fact that I could refinance the equity loan into a new 30 yr mortgage after the project. The downside there is that I am currently at 5.25% 5 years in to a 30 yr mortgage. Thanks for your input.
FYI – even if I used 100% of my equity line, I would still have over 100K in equity on my home. I live just west of Chicago. Our housing market here has slowed but notthing like the devaluations of Florida or the west coast.
JARVIS
JASON
Listen. If you have the money now, put it in your ROTH. You should be maximizing all of your retirement funds, if at all possible. You never know where you’ll be next year. Don’t lose the advantage of time…when it comes to your investments. Procrastination is expensive…
GREG
with home equity (home prices) down and continuing to circle the drain, do not take a 2nd mortgage you may end up “upside down”, go the safe route….
MERRILL
Assuming you can do without the cash, you would be better off financially to max out your Roth each year. You’ll earn, say, 7-8% long term tax free on your Roth. The home equity line is deductible for current tax.
ROY
If your job is good but not great as you state it, I would make sure I have enough cash to cover living expenses at least for 6 months
before I plunged into a home project.
For tax purposes I would place money in an IRA unless you think you might have to pull it back out anyway.
There is nothing worse than no money in the bank when times get tough. Maybe you should hold off on your project
till you build more of a security net. The credit crunch is not over yet so lower loans might be coming-
ALLAN
If the home rehab project leads to a potential inflow of funds (aka rental unit/section) put most of your funds into making that happen…just play by the rules, document everything and in the end you’ll have cash to stash in a IRA