05-30-2008, 03:25 PM
I didn't say you had to know all of that information, I suggested that you run several scenarios making different assumptions. There is no way answer to your question with any reasonable accuracy without getting a lot more details, but the nice thing is that you're dealing with hard numbers, so the calculations are straightforward and the answer is always the one where you have expended the least amount of money at the end. It depends a lot on what the future holds and what your current loan balance, terms and extra funding needs are.
Whenever I've come up against this kind of question myself, I've tried a number of scenarios and have picked the solution which seemed to fit with the most likely of those. What is more common is that you run a bunch of scenarios and they all give you close to the same answer. Just make a couple of assumptions (i.e. keep house 10 years vs 5 years, maximum vs stable ARM rampup, refi vs heloc...I'd assume that your tax bracket stays the same, and you know what your local property tax rate is that will be applied to any significant improvements) and calculate how much money you will have expended at the end of 5 and 10 years for each of those. You can also use zillow to see what houses in you neighborhood similar to yours but with your proposed improvements are worth.
Whenever I've come up against this kind of question myself, I've tried a number of scenarios and have picked the solution which seemed to fit with the most likely of those. What is more common is that you run a bunch of scenarios and they all give you close to the same answer. Just make a couple of assumptions (i.e. keep house 10 years vs 5 years, maximum vs stable ARM rampup, refi vs heloc...I'd assume that your tax bracket stays the same, and you know what your local property tax rate is that will be applied to any significant improvements) and calculate how much money you will have expended at the end of 5 and 10 years for each of those. You can also use zillow to see what houses in you neighborhood similar to yours but with your proposed improvements are worth.