Upgrades! decisions, decisions and decisions!

We are in the process of buying a Primary home and renting our current fully upgraded smaller home.

The home which we are going to is in it’s original condition and need lot of upgrades. Some functional and mostly cosmetic. After scraping all our accounts, we won’t have any amount left for upgrades.

We have a ‘variable rate equity source account’ for 50k that we want to utilize for the upgrades. But, in the dilemma. Are the upgrades/comforts worth the increasing interest rate? we will be able to repay $2,000 per month. I understand this is a personal choice. What is the normal?

If you don’t have any savings left, then I wouldn’t do it. You’ll just be adding another monthly bill making it harder to rebuild your savings after the home purchase.

Wait - the interest is 2000$ per month for the 50k loan ? That sounds very high.

$2,000 to $2,500 is our capacity to repay the loan. The interest would be perhaps around $100 per month and might go up based on the prime rate.

ok that makes more sense. I would prioritize what you really need done. If you think you can spend 10k and get discounted pricing for the top 3 work items, I would get it done. The rest can wait. Ultimately you do need to ask yourself how long you can live with the imperfection in the new house.

I would go for the upgrades, and pay the $100 interest per month but do not pay down the principal until you have saved enough for an emergency fund. For a $50k loan, the difference is small if the interest rate is a little higher or lower. But having cash on hand is very important in case some true emergency comes up and you need money.

Only $100 interest on 50k loan? Your interest rate is only 2.4%, that’s really good. In that case, you don’t need to rush to pay off the loan.