This old house... (need advice)

I bought my house in 2006. Instead of buying one of the newer "cookie cutter" houses we opted to by a house "with character" that was built in 1985 on an acre of land. The kitchen and master bathroom were in need of an update and 9 windows needed to be replaced... projects we figured we would get to eventually.

The purchase price was $165k and we only had about $10k to put down. We were apartment dwellers in Baltimore and this was our first home. We got a 30 year home loan at 6% and unfortunately had to get mortgage insurance ($85/month). Our agent stated that we would most likely be able to drop this after a couple of years due to the home's appreciation. We also took his advice to make an extra payment every year (towards the principal) to accelerate the payoff.

Then the shit hit the fan with the economy.

At this point, the remaining principal on the loan is $138k, but the zillow value on the house has dropped to $149k. Our last few power bills have been $400-$500 due to the bitter cold and I have to wonder how much we could save if we replaced those 9 windows. The outdated kitchen and bathroom are approaching the point of being depressing.

Are there any suggestions for getting some money to replace those windows and update the rooms? Is zillow relatively accurate? Am I still stuck with the mortgage insurance since the house value has apparently dropped (according to zillow)? The mortgage company keeps pimping "historically low rates" in their mailers and are encouraging customers to refinance. I hate to go back to 30 years (even though it has only been 4) but maybe that is me being shortsighted.

Sorry for the long post, put I am not really good with this stuff. Any suggestions are definitely appreciated!!!

 

As for doing the refi, run the numbers on your current mortgage by making the normal payments and compare that to a new lower rate mortgage and see which one has you paying back less money. Then either way you can keep doing what you are doing by paying more each year. Some lenders may possibly do a 25 year mortgage as well which will keep you in line with paying the house off in the same time frame and still save you money.

 

Is it typical in a refi to get extra cash for these types of projects? Nine windows and a kitchen/bathroom remodel can't be cheap. I'm thinking $10k at the least.

ETA - someone else suggested that a new HVAC unit may have a more noticeable impact on the electric bills than new windows since the existing unit is so old. Why am I thinking of that old Tom Hanks movie "the Money Pit?"

 

Depends on the lender and how much equity you have.

 

Zillow can be a good estimate but don't trust it by any means. I can guarantee a mortgage officer will not trust it. We redid our 2 bathrooms a couple of years ago and it costs us about $4K. Windows are damn expensive so I'm guessing it'll cost more than $10K to do all you need to do.

Given that cost, I'd get a home test done where someone comes in and test the house for heat loss, etc. Sometimes it's not the windows but inadequate insulation, etc. I think those tests are somewhere around $250.

As far as money, it depends on the equity in the home as to if you can "cash out" during a refinance in order to pay for new windows, bathrooms, etc. A typical lender, these days anyway, will want to keep a 80%-90% LTV so add your first mortgage to a potential equity line and see if you have enough equity to keep that LTV. Then there's the whole getting qualified thing and that comes back to a debt/worth calculation. An advantage of an home equity line is you can deduct the interest.

 

Do you really think that the windows are the problem or is there an issue with overall insulation? If you are sure it's the windows, then replace them right now - cause it's only going to get worse in the summer. And the way things are for contractors right now you can drive a hell of a bargain - especially if you pay cash. If you think that it might be be insulation, consider having an extra layer put in in the attic.

What is the efficiency rating on your furnace?

 

When we bought the house, the inspector stated that nine windows needed replacement (broken seals). So I know they are at least a part of the problem.

The HVAC is old as hell. We needed a freon recharge last summer and our maintenance guy said that we were getting close to replacement time.

The problem is that I don't have cash laying around to do either. I was hoping at some point to perhaps get a home equity to update/repair these things, but the shitty economy has my home value going in the wrong direction. I may have to just be patient and ride it out until home values recover.

We are very fortunate to live on a pretty densely wooded lot, so summer time energy bills are very reasonable ($100-$150).

 

Renovation would be an best option your house really looks awesome and beautiful and more important think you can sell your house at more profit rate..

 

1. You ARE being shortsighted about the refi. If you can cut your monthly payment, especially without paying anything to refinance (no closing costs, no points) and you have a no prepayment loan (standard), you can pay it off in the 26 years if you want, you'll just end up paying less interest. I cut my payment by about $200 bucks, but I still pay my old mortgage amount. I'll just pay the loan off that much faster than before. The key is figuring out how many months = closing costs/(reduction in monthly payment), and if that time period is one that you will realistically be in the house, usually 1.5-2 years, then you pull the trigger. As far as the closing costs, do the math for the savings in payments, because if you're going to be there for a while, its possible buying a lower rate by paying closing costs will be advantageous.

2. I have terrible windows as well, and though its tacky as hell, I put up thick plastic over the windows in the winter until I'm ready to drop 10K into the windows. Saves about 1/5 of the energy bill. It gets depressing, but it does save money.

 

You should've bought a "cookie cutter" house instead of one with "character" so you could've avoided all this shit.

You're welcome.