Should We Payoff the House, Make Improvements, or Neither? – Nare

“Dear Steve,

My wife and I would like to make about $60 K worth of improvements to our house. The problem is, the house right now (with improvements over time that we’ve made) is already worth $11 K less than the maximum selling price it would fetch on the current market. We don’t necessarily improve just to meet market demands for a selling advantage; some of it is a quality of livability/enjoyment factor.

Also, our mortgage payoff is almost the same as the cost of our wish list of improvements ($61K). The improvements we want to make are the master bath (currently, an archeitectural nightmare) and the kitchen, two of the biggest payoff areas that can be made in a home. The current rate of appreciation in our area (at least, prior to the mortgage meltdown) was 5%/year. Money for improvements or mortgage payoff can be made from cash flow over abot 10 months. We love our neighborhood. Should we: a) pay off the house; or, b) make the improvements; or, c) do both, or d) do neither; just enjoy what we’ve got?


Dear Nare,

Interesting question. This is one that needs to be answered emotionally.

The safest answer is to do nothing and wait to see what the market is going to do as far as returning to value going back up.

That being said, there is also a value to improving the quality of your property and your life through renovations. If you only have a $61K mortgage on your property then you might want to look into a cash out refinance and take the money out for the improvements if that plus your current mortgage would leave you under 80% of the homes current market value. You didn’t mention what the market value of the home is now.

I know some home improvement contractors and because business is slow they have been practically giving jobs away for cost just to stay busy. So acting now may give you some financial benefit as well.

See also  Should We Put More Debt on Credit Cards to Finish the Basement? - Corrie

For me personally, I plan to stay where I live for a long time. Even in this bad economy I have just made a major amount of home improvements including installing solar panels.

I think the only person that can answer your question is yourself. The answer will lie in the level of risk you are willing to undertake and the likelihood that you will be able to remain for enough years to see your homes value level off or rise a bit.

Ideally I’d like to give you a less ambiguous answer but as I said, this is more of an emotional situation than a financial one.

Please update me on your progress by

You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.

P.S. Be sure to read ‘The Secret of Surviving Through Difficult Economic Times. What I Learned On My Journey‘.

Damon Day - Pro Debt Coach

Steve Rhode

Leave a Comment