Can You Afford to Finance a Remodel?

As per MSN Money

People who dream of renovating a home — or just redoing the kitchen or bathroom — might wonder how other homeowners finance a home remodel that can cost tens or hundreds of thousands of dollars.

Paying for a home remodel sometimes involves a new loan. But more often, homeowners have cash on hand from other sources, says Steve Klitsch, owner of Creative Concepts Remodeling, a home-remodeling company in Germantown, Md. Klitsch says that most of his customers in 2012 used cash from personal savings to pay for remodeling projects, though two families received substantial gifts from their parents and two others refinanced their mortgages and cashed out some of their equity to finance a home remodel.

People who spent their own money to finance a remodel typically were more frugal and asked more questions about labor, materials and warranties than those who received gifts or refinanced their mortgages, Klitsch says.

Among those who had saved up were dual-income couples whose children had recently completed college, ending years of education expenses

“There’s a relationship between working couples [or] life partners who have children who’ve completed college and within a very short period after that … say, ‘Wow! Look at the money we have,'” Klitsch says. “They’re not paying tuition, not buying books. They suddenly have thousands or tens of thousands of disposable income they can put into their home.” A 2012 survey by the National Association of the Remodeling Industry, of Des Plaines, Ill., also says that many remodeling customers have adequate savings.

Cash out to remodel
Homeowners who tap their equity to remodel will be limited to the lenders’ maximum loan-to-value ratio. Most lenders won’t allow a homeowner to borrow more than 80% of the home’s value, says Stephen LaDue, senior loan officer at Prime Lending, a mortgage company in Brookfield, Wis.

“If you have a $250,000 house, 80% is $200,000,” he says. “If you want to do a $50,000, remodel and you owe $175,000, you only have $25,000 to work with.”

Shopping around might turn up a local lender or credit union that will step up to 90%, LaDue says.

“Be a smart shopper and ask upfront: ‘What are your loan-to-value limitations? Can I go up to 80%? Can I go up to 90% with a second mortgage?'” he says.

A second mortgage might be especially difficult to get because second-mortgage lenders were among those who “took it on the chin the worst in the housing crisis,” LaDue says.

Still, some homeowners can pull out enough cash for a modest remodeling project that makes a house they’d planned to sell more comfortable for a longer stay, says Rob McAllister, a mortgage broker at West Seattle Mortgage in Seattle.

 “People are refinancing, taking the low rate and pulling out $20,000 or $30,000 to get the house to where it needs to be for them to stay there longer than they’d anticipated,” McAllister says.

An informal NARI poll in April 2012 found that quite a few homeowners planned to keep their home longer than they had intended.

  • 28% planned to stay an additional one to five years.
  • 23% intended to remain another six to 10 years.
  • 10% added 11 to 15 years.
  • 26% planned to stay 16 to 20 years longer.
  • 13% said they hadn’t extended the time they expected to live in their home

Although the survey was not scientific because those polled were self-selected and searching for information about remodeling, it offers a snapshot of homeowner behavior.

Unlimited funds
Some homeowners can remodel with little concern about funds, says Jim Bateman, owner of Bateman Custom Construction, a remodeling company in Fairfax, Va.

“Some people have more money than they know what to do with,” he says. “I’d like to have all those customers, but that’s not the case.”

Others factor energy-efficiency rebates or savings into their calculations. Making a home more energy-efficient during a remodeling project involves upfront costs but can pay off over time, says Gary Henley, president of Henley Homes, a remodeling company in Liberty Hill, Texas.

“It costs you less every month to make the house more energy-efficient while you live there, so why not do it while the kitchen or bathroom is torn to pieces, instead of coming back and making another mess later?” he says. “You’re getting a quick payback, so it makes it affordable.”

Merchants object to bike lane parking cuts in Evanston IL

Thanks to Bill Smith from Evanston Now

Diagonal parking spaces in the 500 block of Davis Street — empty late Tuesday evening — but in high demand, merchants say, for restaurant customer parking earlier in the day.

Some merchants are objecting to plans for a bike lane in the 500 block of Davis Street in downtown Evanston because it will eliminate diagonal parking there — reducing by 10 the number of on-street parking spaces.

Ted Mavrakis, who owns Giordano’s pizza at one corner of the block and owns the building housing Todoroki, said there are five restaurants on the block, “and that creates a very serious situation for parking.”

Mavrakis said half of his business comes from customers who pickup a pizza at his restaurant, and they want to park very close to the door.

“I have another store in Morton Grove, and the pickup business there is twice as large as in Evanston, because I have pickup parking there,” Mavrakis said.

He suggested that the city could solve the parking problem by purchasing the now-vacant lot around the corner at 1515 Chicago Ave. and using it for parking — an idea that didn’t win any takers among aldermen concerned about what that solution might cost.

Alderman Judy Fiske, 1st Ward, suggested the bike lane could be moved a block or two south — to Grove or Lake streets.

“We need to be mindful that we get revenue from these busineses,” Fiske said, “and what they’re saying is that the loss of those 10 spaces would have a dramatic negative impact on their business.”

But Alderman Delores Holmes, 5th Ward said the City Council had already voted last year to do — going eastbound on Church and west back on Davis.

And Alderman Jane Grover, 7th Ward, said the bike route, which is intended to extend from McCormick Boulevard to the lakefront is importatn to regional bike plans.

“Skokie talking about extending their bike path on Church Street to meet with ours, and once you get to McCormick you’ll be able to go almost anywhere,” Grover added.

Aldeman Melissa Wynne, 3rd Ward said she agrees with the idea of completing the two-way bike loop.

“I see more and more people using it on Church Street,” she said. Wynne suggested that city staff reexamine the streets adjoining the block to see if any additional parking spaces could be squeezed into those. “Look at all the loading zones to see if they’re still being used. Make sure we’re not wasting some space.”

Alderman Don Wilson, 4th Ward, said, “It’s critically important to make sure we have a safe route for bikes.”

Wilson, a cyclist himself, said he initially didn’t favor protected bike lanes, but has come to believe they play an important role in providing a safe option for riders to commute and shop downtown.

“We want to keep moving cars and bikes from coming into contact,” Wilson said. He conceded that cyclists could still be “doored” by a passenger getting out of a car, “but it minimizes the risk of a more serious incident — you’re not falling into a lane of moving traffic where you’ll be killed.”

The bike lane also drew support from one speaker during the council’s public comment session. Natalie Watson of 820 Oakton St., said the bike lane will attract more young people to dine at downtown restaurants.

She suggested the on-street parking problem is caused by the city under-pricing on-street parking.

“If you charged a makret price for parking,” Watson said, “more people would park in the garages and people would walk, cycle and take mass transit more.”

Public Works Director Suzette Robinson said Davis Street in the 500 block is narrower than it is in the rest of downtown and that to have any room for a bike lane at all, the diagonal parking would have to be eliminated.

The aldermen, under pressure to act soon on the Davis Street repaving project to be able to get it completed during this year’s construction season, voted to ask staff to come up with alternatives for the 500 block of Davis for next Monday’s City Council meeting, but move forward with seeking bids for the overall project.

Town meeting could be among Evanston’s last

Evanston Tuesday night holds what could be among its last annual town meetings — if a bill now working its way through the state legislature becomes law.

The bill, SB1585, was introduced by Sen. Daniel Biss of Evanston.

Originally proposed as a broader measure, Biss says it’s now been revised to only apply to Evanston Township. It has been unanimously approved by a Senate committee, and, Biss says, “I’m optimistic that we’ll be able to pass it, though of course I can’t be certain of this.”

In the last legislative session a bill filed by then Sen. Jeff Schoenberg of Evanston that would have let residents of any coterminous township hold a vote to abolish that township was defeated after the Township Officials of Illinois lobbied against it.

The executive director of the township group, Bryan E. Smith, last week sent out a memo to township officials across the state urging them to oppose the Biss bill.

In an advisory referendum last year, Evanston voters by a 2-1 margin favored dissolving the township, despite efforts at a chaotic township meeting by a handful of township supporters to block the vote.

If the Biss bill passes, another referendum would have to be held for voters to decide whether they actually want to abolish the township and turn its responsibilities over to the city.

The township, which has a budget less than one percent as large as the city’s budget, primarily administers general assistance programs for the indigent.

The township spends almost as much in payroll costs and admistrative overhead to run the program as it disburses in benefits to general assistance clients.

City Manager Wally Bobkiewicz has said he believes he could dramatically reduce those administrative costs if the city was given the job of providing those services, without reducing benefits to clients.

A financial report prepared for Tuesday’s meeting shows the township spent nearly $1.7 million last year on just under $1.4 million in revenue.

That had the effect of reducing the township’s fund balance to just under a year’s worth of operating expenses.

Town trustees, who also serve as Evanston aldermen, had criticized Township Supervisor Patricia Vance in the past for maintaining a fund balance of well over a year’s spending.

Vance, in response, had agreed to have the township pick up some payments to non-profit social agencies that previously had been funded by the city — which accounts for the decline in the fund balance this year.

The annual town meeting is scheduled to be held at 7 p.m. in the City Council Chamber at the Civic Center.

Thanks to Bill Smith of Evanston Now