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My credit union guy in Dayton asked me one question about my cash out refi and it stuck with me
So I sat down with the loan officer at my credit union here in Dayton about 3 weeks ago to talk through pulling $60k out of my house for a kitchen redo, and I went in with a whole spreadsheet ready. Rates, closing costs, the works. He looks at it for a minute and asks me flat out, "what happens to this plan if the kitchen runs 20% over?" I didn't have an answer. I'd run the math a hundred times on the refi itself but never once on what happens if the project itself goes sideways. He said he sees folks pull out every dollar of equity they have and then have nothing left for the surprises, and that the smart ones keep about $15k in reserve. I sat in the parking lot for like 20 minutes after that just thinking. I'm now leaning toward pulling $45k instead of $60k and keeping some room. Am I overthinking this, or did he have a point? Curious how much buffer other folks kept.
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riley3638d ago
Honestly this feels a little overblown to me. A 20% overrun on a kitchen is a real thing, sure, but the guy is basically talking his book a bit too, since a smaller loan means less risk on his end. Keeping some cash around is just good sense in general, but cutting your pull by 25% "just in case" could leave you short on the actual project and then you're stuck. In my experience most folks who plan a redo have at least a rough idea of where the money goes, and a full 15k buffer sounds like a lot unless your contractor is a wildcard. Take it with a grain of salt, but a modest cushion makes sense, not a giant one.
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