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Should I get a loan to finance a kitchen remodel?
Looking for some advice from your knowledgeable ladies 
)
We bought a new house in June, with a mortgage. I still have a good amount of savings. The only big project we wanted/needed to do right away was to remodel the kitchen - there is very little storage or workspace, we haven't been able to unpack in there, and it's difficult to cook in the space.
When I started looking into doing the kitchen, we were planning to go with stock Ikea cabinets, nothing fancy, and it was going to be a relatively low-cost project we could easily afford now. However, due to the size/layout of the room and some other circumstances, Ikea cabinets are no longer an option, and there's going to be a bit more work involved to get the type of kitchen we would like. I'd rather do it once and do it right, but we've gotten several estimates from different contractors and design firms, and we're looking at spending at least twice what I had originally budgeted.
I don't have the quantity of money on hand that I would need, while still keeping a comfortable emergency fund, but currently I'm putting over $1000 a month into savings. As far as I see it, I have a couple options. Which do you think is the way to go, or is there another option?
1) Postpone the project for now, put up with the kitchen and continue saving for another year or two. Barring any expensive emergencies, I would then have enough cash on hand to fund the project (at 2011 prices...). However, we would be miserable for those couple years, and all the time we've spent planning and designing these past couple months would have been somewhat wasted.
2) Take out a loan to cover the portion of the project not covered by my savings. I've looked at both my bank and credit union, and the bank could loan me the amount I need at a lower interest rate than the CU (9.66%), with no penalty for early repayment. If I put the $1000/month that I usually save, toward paying off the loan, I could have it repaid in under 2 years. I would still have that emergency fund in my savings, and if I had an emergency I could pay less than $1000/month and put the additional money toward that.
If I do take a loan, I also have a mortgage and my car isn't fully paid off (though I could pay it off right now if I wanted) - how would this affect my credit?
Thanks for your advice!!
Re: Should I get a loan to finance a kitchen remodel?
We always save for renovations and pay cash. I hate adding another monthly payment to our list.
I thought I needed to redo our kitchen right away, but I actually don't mind it now. We moved is down the project list recently in favor of making our attic a more liveable space.
DO NOT FINANCE A KITCHEN REMODEL.
This is not a "need." Do not kid yourself here--this is a want. Either scale back the project to something you can afford now or save until you can afford to do the full scale remodel.
You will not be "miserable" for two years because of a less than ideal kitchen. I have a TINY 1942 kitchen with nil storage or work space. I somehow manage to get through my days.
Save up. I find it hard to believe that you will really be *miserable* unless you have a brand new kitchen. And if you will, perhaps you need to get some perspective so you can appreciate what you do have instead of only seeing what you don't.
And how will your designing time be "wasted?" You'll still be doing the project, just not quite yet.
Quincy and Dexter, new BFFs
I used to be kris216.
We did number two, I know it's not MMers, but our retirement is fine, we've never had CC debt and we got a good interest rate because of our credit scores.
We financed 20K and we are on board to have it paid off in two years. Every day seeing the remodel, I think we made the right decision. We had the $ as well in our emergency fund but we didn't want to use it. I know the practical decision is 1, but I think sometimes it's okay to finance a remodel.
I lean towards saving up.
It is also very important to the answer, though, to know how much you put down on the house. Even though a kitchen remodel will arguably increase the value of your house, you don't want to go into negative equity to get it done.
We also bought a house that needs a kitchen remodel. We've gotten used to it/made it work over the last 5 years. It will probably be a couple more years until we're ready to do it/have saved up enough.
Thanks for all the responses so far. I should add that besides the mortgage and my car, we do not have any other debt. I do not even carry a balance on my credit card, which is why I am feeling overwhelmed even considering getting a loan for this project.
Ok, maybe we won't be "miserable," but have been extremely inconvenienced by not being able to unpack our kitchen and dining room things yet - I have to go digging through boxes in the living room when I need to find a pan, etc. Also, there were other projects we want to do that hinge on getting the kitchen done first (painting adjoining rooms, for example). We are also having problems with the current appliances. So I would rather take care of the whole kitchen now, than add temporary storage, etc., just to have to tear it out and redo it again later.
Save first then remodel.
Someone else lived in your house and used that kitchen - you can get creative and find a way to make it work for now. Miseable if you do not have a remodeled kitchen??? Honey, you do not know what miseable is.
Work to pay off your debt - not add to it!
I would finance it and this is why: in our last house we saved and saved and saved for our kitchen remodel - we finally had the money to do it, remodeled....and moved six months later. The fact is, rates are so low right now, it is practically free money and your $$ isn't earning anything in a savings account. This is an INVESTMENT this isn't a car or a fancy pair of shoes or handbag - depending on where you live, you will get most of the money you invested back (and then some in some areas of the country, like where I live) - this is assuming you don't do something funky like...install tin tiles with the logo of your favorite football team or something. Again...this is very dependent on where you live.
I know people are weird about HELOCs and such but - if HELOCs are used to improve your investment - that is one thing -people tend to get into trouble when they use a HELOC or home equity loan to pay off credit card debt or pay for a vacation. In one scenario, you are improving your investment and thus creating more equity in your home, in the second you simply become under water.
I am a CFO, I am not at all debt adverse, so my opinion on these things is often quite different than most people's.
Absolutely not. We are not looking for high-end cabinets, appliances, countertops, etc. Just an upgrade to make the layout and storage space more functional. I would love to be able to go with an Ikea kitchen! But due to size constraints, their stock cabinetry sizes won't fit, and also we need to move a doorway, which has led us to the semi-custom/contractor route.
Germany 2012
I was originally estimating $15-20K, and it's going to be more like $30-35K (and that's not counting any unexpected expenses that come up).
OP is not being over dramatic - a kitchen remodel is super expensive especially if you have to replace cabinets that have to be custom.
Quincy and Dexter, new BFFs
I used to be kris216.
How much are you planning to borrow vs. how much did you already have saved up out of the 15-20K? Because if you really do put $1000/month into savings, it won't be 2 years before you can afford an extra 10-15K over your original estimate, it'll be more like 12 months. On the other hand, if you don't have 15-20K now, that would push back the time frame.
Germany 2012
Well, sure, if you don't unpack your stuff it's going to feel pretty miserable. But what we're suggesting is to unpack (and perhaps make slight modifications now to make it more workable) while you wait & save up.
I get that you want to do it now. When we moved into our house, I wanted to do our bath (which is still awful four years later) & kitchen right away, too. But it doesn't make sense to pay 9% because you want it NOW.
Fair enough, but there's a big difference between financing a few thousand because your savings fall short, and financing 25K (assuming costs don't overrun) at 10% when you just got a mortgage and you halso have a car loan. (Although the OP confirmed that it would be more like 30K total.) I guess I don't agree with the OP that her kitchen is SO BAD that she needs to go into MORE debt right away.
Germany 2012
I definitely do not agree with financing at 10% - I guess every area of the country is different but banks around here are offering 100% home equity loans at 2%. For 2%, yes, for 10%, oh hells no.
And it is possible that her kitchen is so bad but everyone's definition of that is different. We are in the process of renovating ours - our house has literally been making me sick, our kitchen and bathrooms have mold everywhere. Not to mention, when our workers started digging in we had so much termite damage they weren't even sure how one of our exterior walls was still standing. That is pretty bad. Definitely worth 2% to me...not sure about 10%. Although I feel a hell of a lot better so maybe....
(DH says definitely not)
Right now, today, I could spend $20K and still have an emergency fund that I'm comfortable with. If we do remodel right now, the estimate that we received is for $25K, not including the cost of appliances (again, nothing high-end, I'm expecting a couple thousand for them), flooring, or permits.
There is nowhere to unpack to, that is the problem. There is no storage space or cabinetry, it's a very poorly thought out layout with a lot of wasted space. If I could have unpacked and put things away, I would have, and we would definitely postpone this project until we could pay the whole thing in full!
as someone that had an extra $2K every month to save up until last week, I would say save. My husband just lost his job and if we had an extra $1K a month to pay onto a loan, we would be screwed.
save up - we have stable jobs. Stuff happens that you can never anticipate.
We really wanted to buy a house because we dont fit in our apt anymore, and we can afford the downpayment but it would be tight. We decided to wait. I am so glad we waited.
Can you PIP? I honestly can't imagine you have less storage space in your kitchen than I do unless you were being serious about not having cabinets.
Declutter. Lose the crap you don't need. Get creative.
count your cupboards.
above the counter, I have 1 tall one (split into 2 doors with 3 shelves in each one) then I have one shelf above the stove and 1 shelf above the fridge - that is 7 shelves above.
and I have 2.5 cupboards below the cupboard. they have no shelves at all.
and I have 4 drawers.
Our wedding china is still at the china store. We never picked it up.
and what we did to help us deal in the short term - we bought 2 isolated cupboards that mount on the wall from Ikea. They were $30 each.
A kitchen without a single cabinet? This I have to see. Please do post a pic.
Do you you have a china cabinet in your dining room? Put your dishes in the top, pots and pans in the bottom. Whatever's in the china cabinet now can go into boxes to make room for the things you use every day.
Or buy a cheap piece of storage furniture that you can use elsewhere later - in the basement, garage, etc.
Quincy and Dexter, new BFFs
I used to be kris216.
Is that the OP's photo? If so, stop your whinging. It's a small, cute kitchen. You can work with that space.
Per her blog.
Huh. I could make that kitchen extremely fabulous for $2k.
Omg. Seriously? You have plenty of cabinet space. And a U-shape kitchen is relatively efficient.
You have plenty of work space there, especially because you have a cooktop that doubles as prep space.
Check this site out for some fun ideas for small kitchens: http://www.thekitchn.com/thekitchn/small-cool-kitchens-2010/
They featured a professional chef who has a TINY (smaller than yours by a good margin) Manhattan kitchen with a coil top electric stove. You can make this work.