Quick question

So we applied to the credit union for a home equity loan, and soon we will apply to the township for our construction permits. But to whom do we apply for the time and energy to get this project underway and done while holding down full-time jobs and being full-time parents?

This feels familiar

Tonight Ken and I pulled together our paperwork for the home equity loan as it is due back to the credit union by Monday. (Never fear: We are mailing it to a Philly address from within Philly tomorrow. It will get there Friday, if not actually tomorrow.)

The amount of paperwork is necessary, but it is still a bit staggering. Thank goodness we're better organized about our finances than we are about the rest of our possessions that are strewn randomly about the house. Though, to be honest, the deed to our house was being stored for some crazy reason on the top shelf of our coat closet. (Major kudos to Ken for remembering it was there. I would've sworn it was in my old rolltop desk in the boys' room.) I'm having flashbacks now to the closing on the original mortgage and my horrible trepidation leading up to it. Thankfully we went through with it because soon afterward the housing bubble hit, and if we hadn't bought when we had, we might only be shopping for a house right now.

But back to this fun process. Paystubs, check. W2s from 2009, check. Proof of homeowners' insurance in sufficient quantity, check. Aforementioned deed, check. Copies of our drivers' licenses, check. Promise to sign over the first-born child of our first-born child should we default on this loan and he/she not be able to spell Rumplestiltskin, check. Err, OK, not that last one. But I think I did accidentally include the kitchen sink in the envelope. We'll be getting a new one, anyway, and I just wanted to be sure all bases were covered.

So that's all taken care of, and next we wait to see if they need any more info, and otherwise we'll schedule the closing and put this stressful part of the project behind us so we can move on to other stressful parts.

Meanwhile, Ken is out in the garage continuing to fine-tune the organizing and purging that he and his dad did in massive amounts this past weekend. I won't show "before" pictures, but soon we'll have some "afters." I'm very impressed with the radical change, I can tell you. And once there's some open space out there we'll start filling it with all the plastic tubs and cardboard boxes that I've been dutifully packing up from the living room, dining room, and kitchen so they can be safely out of the way of the dust and debris.

One foot in front of the other....

Money, money, money

Disclaimer: I feel weird talking about money in a public forum (I even do in private forums, with rare exception), but it's an integral part of this whole remodeling process, so I'll just keep it vague enough that no really personal info about our finances comes out.

Anyway, we ditched the idea of the mortgage refi. Our current mortgage payment is super cheap and has a fixed rate of 5.26% until it's paid off in a maximum of 24 years. Better not to mess with it.

I spoke to the credit union loan officer this morning and told her we'd rather do a home equity loan. Ken and I did briefly discuss a home equity line of credit last night, but we'd rather have a set loan payment and not open a revolving credit account. Just personal preference, really. There are pros and cons to both types of financing, and we chose the one we're more comfortable with.

So our home equity loan got conditionally approved within the hour (yay for PFFCU!), and we'll be getting the paperwork in the mail within 3-5 business days. Meanwhile they'll check comps in our neighborhood to make sure we didn't overestimate our home's value. As long as the comps bear that out, the loan amount we requested goes through. If they play it more conservatively, no big deal. We take less money and adjust our home improvements to meet our new budget.

I really hate taking on a debt, but the rates are good these days and we'll be spending a fraction of what it would cost to have a contractor do the same work. And if you've seen Ken's garage in person, you know he doesn't build junk. He may fill it with junk, but he doesn't build junk. Just kidding, sweetie! Couldn't resist taking a jab atcha.

Boxes

About a week ago I realized that just purging the house of things we don't really use or need was not going to be enough. I need to completely pack up the first floor of our house as if we were planning to move out. Because for several months we really will not be able to use the living room, dining room, and kitchen in the manner that we do now.

Luckily, I can get those fantastically solid and consistently shaped Hammermill paper boxes from work. I've been doing a loop through the office every afternoon around 3:30 to see if there are any empties or near-empties that I can snag and take home with me. My goal is to pack roughly two boxes per night. That is, boxes of things we plan on keeping. Purging is still a whole other job until itself.

Thank goodness I get the weekend Inquirer. I have no time to read it, but I pull out the coupon flyers and stack the papers by the fireplace. All winter long they made for good kindling; now they're being put to use as packing material.

My first plan of attack involves the china cabinet since, let's be honest, a family with two kids under 6 years of age does not use china. Next will be the living room bookcase. The bottom shelf of kids' books will have to be incorporated into the bookshelf in the boys' shared bedroom. The rest will be summarily purged or packed as necessary. If you've been dying to find a 2001 Writer's Market or Kaplan's 2003 GMAT study guide (with CD-ROM!), I've got you covered.

Where we'll put the boxes once they're packed is really up to Ken. My thought process ends when a given box is sealed. Attic? Garage? Who knows? I'm thinking of starting an over/under pool on how many boxes we end up having after all of this. I think we're gonna give the Great Wall of China a run for its money.

As the head spins

I talked to our mortgage refi agent today, and my head is swimming with numbers. Turns out that, while it may be cheaper in the long run to refi, it may be less stressful to just get a home equity loan.

What we preferred was a 20-year fixed-rate mortgage with $X cash out to do the remodeling work. Turns out that the credit union uses Fannie Mae for mortgage refis that are longer than 15-year terms, and the closing costs would be $5-$7K as opposed to $1K with a 10- or 15-year mortgage that the credit union handles in-house. Obviously, higher closing costs, while they can be rolled into the loan, result in less $ we can put toward the remodeling work. We have decent equity in our house but can't crack the 80% loan-to-value (LTV) barrier because the interest rates worsen at that magical mark. No point in refi'ing to a higher rate, right?

While I would really love to pay off our mortgage before I turn 50, accelerating our payoff from our current 24-years-left mortgage to a 20-year mortgage was going to be considerably less painful than the option of condensing all of this moola into a 15-year mortgage. And, as we expected, they insist on us having an escrow account (taxes only; not homeowners' insurance) until the LTV drops below 70%. Depending on how much cash out we would take from the refi and how much our house is worth according to them, that would take 1-3 years.

Lucky for us we have a great neighbor who is a real-estate agent, so she pulled comps for us, and we might have underestimated our home's worth on our initial refi application. Turns out Ken's massive garage might actually be considered an improvement on our property after all, and we do have a cozy fireplace and wet bar. The downside is we have one pitiful bathroom, but that's partly what this project is meant to correct as there is no way I'm going to raise two boys through their teenaged years in a house with one bathroom shared by all four of us. I shudder at the very thought.

We'll have to crunch the numbers tonight and see what we rises to the top as the best option. Although the interest rates on their home equity loans are roughly 2% higher than the mortgage rates, we would have an 85% loan-to-value cap (a bit more breathing room before the rates would crap out), and we wouldn't have to worry about adding an escrow account to the mix like we would with their refi program. I like the financial fluidity of managing our own tax payments.

I had hoped the financing decision would be pretty straightforward, but I'm the one who muddied the waters in the first place by suggesting we refi, rather than take a loan. Time to put that option back on the table and parse it out. Likewise, we could consider a home equity line of credit, though I need to know more about those before I'd jump in.

The good news is that we are one step closer and so much more educated about financing options. Padraic asks me every day whether we're going to make our house bigger yet, but he's got a little more waiting to do. I think I'll keep him busy by putting him to work on packing up the living room. The bookcase has his name all over it, and he already loves boxes.

Mortgage refi and grading plan

Our preparations for beginning the remodel continue. We sat down and looked at our funding options and discovered that it would be cheaper in the long run to refi our mortgage with the credit union than to take out a home equity loan. We applied on Tuesday night online, got conditional acceptance on Wednesday morning, and now I have to call the loan officer on Monday to talk about the details. Assuming we get the terms we wanted, we'll be getting a 20-year loan (current mortgage has 24 years left) at 5% (current mortgage rate is 5.26%). The mortgage payment itself should rise by only about $210/month.

They may want us to set up an escrow account, something we haven't done except for the first year or so of our original mortgage until we refi'd that one. We've been handling our own taxes and kind of prefer to keep going that way, but if it's a condition of the loan, we're not going to decline solely based on that expectation. It would be something to get used to again, but it wouldn't be the end of the world.

Meanwhile, Ken visited the township inspector's office and got all the info he needs to finish the plans and submit them for permit approval. Permit costs will be around $900, and they want us to put $1000 in an escrow account, presumably in case down the line they discover a violation. If we wrap up the project with no problems, we get that money back.

The one surprise that arose during that visit is that Ken needs to submit a grading plan, meaning he has to give them a plan showing the contours of the ground on our property. We didn't have to do any such thing back in 2003 when we built the garage. We have a quarter acre, so it'll be no small task. And the only way to do it successfully was for Ken to invest in a surveying rod and laser level. They're not cheap, but he shopped around and got them for about half what they should've cost, and when the project is over, guess what we'll be selling on eBay? If he doesn't get attached to that spiffy laser level, that is. At least that will come in handy for things like installing the kitchen cabinets, windows, etc. I like things with multiple uses. Now the surveying rod, on the other hand, meh. I think that can go when we're done with it. But if you know Ken, you know how he likes his tool collection. We could set up our own rental shop.

Now Ken has to set aside the time to do the grading plan and make any final tweaks to the house plans, and then we can submit everything and wait to see what the township says. We're not asking to anything brazenly new here--other homes in the neighborhood have added the rooms we plan to add--so we don't anticipate any major problems, but you never know when dealing with local government.

Last night we enjoyed entertaining some friends out on our deck, which will soon be the site of the new kitchen. While I'll miss having a backyard hangout this summer, it's definitely a trade up. The deck is practically falling apart, and before we would end up investing time and energy into fixing it up, we will tearing it down and tossing it into a Dumpster. So if you live nearby, you may see us loitering on our own front lawn a lot this year.