5 No Return Home Renovations

The cable channels are full of shows that claim a home renovation will get you a better price when you sell, but the truth is not every project pays off. So much for reality TV.

If you've ever done it, however, you know that remodeling your house is an expensive proposition. So today, Kingdom Advisors President Rob West reveals some projects where caution is advised. Then we'll take your calls on anything financial. 800-525-7000.

800-525-7000. I'm Steve Moore. Five no return home renovations. That's next on MoneyWise Live. Okay, Rob, you're sort of raining on our parade today when it comes to remodeling projects because a conventional wisdom says, not to mention the TV shows I just mentioned, that they will increase your home's value, but I guess maybe that's not always the case? No, it isn't, Steve, and we'll get into that in just a bit.

But first, let's look at the numbers. According to a survey by the National Association of Realtors, we spend nearly 400 billion a year on home renovation. HomeAdvisor says that's on the low end. The average remodeling project runs from 15,000 to 45,000 on the high end.

It could run you all the way up to 200,000 depending upon the project. Obviously, not everyone remodeling a house is looking to make a profit. Function and enjoyment are clearly important considerations as well. But if you plan on selling your home someday, and certainly if it's in the near future, you need to carefully consider cost versus return.

All right, so what's first on our list of projects that don't often pay off? Well, it would be a family favorite, Steve, an in-ground swimming pool. Yes, it's a great way to beat the summer heat. But consider the cost before you get your feet wet. Installing a pool could cost you around $50,000, upwards of $100,000 depending upon the part of country, the country you're in. So you have to enjoy taking that dip. You must add to it, I will mention, the extra cost of maintenance and insurance, not to mention electricity. And for all of that, the survey showed you'll get back just 43% of what you spent.

Wow. You know, this sort of reminds me of the definition for the good purchase of a boat, something along those lines. And that's one that your best friend owns and you use. That's right. So same thing with the pool, maybe.

Okay, what's next? Well, our next no return project is installing new carpeting throughout the house. Now, you'd think that would be a plus, but get this, it could actually lower your home's value. You see, buyers don't like carpet, maybe because it tends to gather dirt and germs. And if they do like carpet, what are the odds that they'll like the color you chose? A much better alternative is, of course, more expensive wood flooring. But the survey showed that it'll net you about 7% in the way of a return on your investment. Not too much.

Okay. Forget the carpet, go with wood. What's our number three project that often doesn't pay off? Well, that would be going bonkers in the master bedroom. Some folks like to expand it by moving a wall and decreasing space in another room, or they'll put in fancy stuff like French doors and a gas fireplace. But the surveys show the more you spend, the less you'll actually get in return at the closing table, with the average return just about 50% of what you spend on the master bedroom.

Instead, consider a fresh coat of paint and maybe upgrading a few fixtures to stand up the room. Okay. Now, I'm going to do something here that's probably uncouth, inappropriate, and downright rude, Rob. I don't care.

I just don't care. Okay. Do you have a gas fireplace?

I'm a little nervous. Do you have a gas fireplace in your bedroom? No, I don't. We don't either. No, we're low class like that. All right. All right.

We're up to number four, I guess. Is this where you talk about the kitchen? It is actually, and the results are really surprising because you often hear that the kitchen sells the house. And while you don't want to have run down appliances and beat up cabinets, a major kitchen renovation, get this, could run you well over a hundred thousand dollars.

It would have to cook your meals for you to make it pay off. The survey showed that a major kitchen renovation returns just over 50% of its cost. To some extent, the less you spend on a kitchen renovation, the greater the return. A minor overhaul would cost just over 20,000 with a return of over 80%.

So even then you don't get all of your money back. We should mention that remodeling projects in general can be selling factors. They may increase the likelihood of selling your home, though not necessarily at the price you want.

Okay. Now I hear music in the background, which probably means we can't get to our fifth and final home upsell, if you will. So when we come back, we'll talk about that renovation and take your calls 800-525-7000. Buying a home is the largest, most nerve wracking purchase most of us ever make. It doesn't help that you're entering a maze of unfamiliar words and confusing options that can leave you intimidated, frustrated and afraid you've been taken advantage of. Navigating the mortgage maze by Dale Vermilion helps you clear up the confusion, unrack your nerves and make the best mortgage decisions possible with confidence. Navigating the mortgage maze available when you click the store button at money wise live.org. If you have money in a retirement account or just a general investing account, you know, the stock market can sometimes be like a roller coaster, but it is possible to enjoy both profit and peace of mind and investing. No matter what's happening in the market, you can see a short video webinar on that topic at soundmindinvesting.org. Since 1990, Soundmind Investing has sought to offer financial wisdom for living well.

Soundmindinvesting.org. Let's be honest, this whole Coronavirus thing has a lot of people rattled. The world's in panic mode. So deep down inside, how are you handling it?

Hi, I'm Bernie Dymett from ChristianityWorks.com. When all you hear on the news is how bad things are, stock markets crashing, retirement savings evaporating, businesses folding, it's easy to go with the flow. It's easy to let panic set in. Yeah, we know that God's in control.

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This is a program that helps you find God's plan for your financial life. And today for just a few minutes, we're talking about five no-return home renovations. And if you have an example of a home renovation that really didn't pay off in the end or something you would definitely redo, pro or con, good or bad, give us a call or anything else financial. 800-525-7000. We have open lines.

800-525-7000. Okay, Rob, we're on our fifth and final home renovation project that won't pay off most of the time. What do we have? Well, that would be one that's more popular in the south, perhaps less so in the north, and it's the sunroom. It can actually be a great place to hang out in nice weather, letting sunlight in, keeping the bugs out. But with an average installation cost, Steve, of $30,000, it's a losing proposition as far as return on investment, which is often less than 50%. You know, compare that to the cost of a patio umbrella and a can of off.

You want to just give this a serious thought. Any other things to consider before you write a big check for home renovation projects? Yeah, well, let me just say one thing you certainly have to consider is whether the project fits into your budget. Obviously, it's best to save the money first. But if that's not possible, folks often take equity out of the home to pay for the renovation.

We've certainly seen a lot of home appreciation over the last decade, and many folks are tapping into that. But also make sure those payments are going to fit into your budget. If you refinance your mortgage and take cash out to renovate, make sure you don't extend the term of the loan. Make sure you save at least a point on the interest rate and make sure you're going to stick around for a while. If you take out what used to be called a second mortgage, make sure you go with a home equity loan. I would advise that over a home equity line of credit or HELOC because the HELOCs generally have variable interest rates.

I'd rather you get a set amount of money at a low fixed interest rate with a reasonable repayment period and get that thing paid off as quick as you can. All right, well, that's a good suggestion. And that comes obviously directly from our host, Rob West, the guy who's in the middle of building a 150-foot dock out to the lake so he can drive his cabin cruiser right up to the backyard as soon as they put in the lake. Now, he's got the yard and he's got the construction.

The Corps of Engineers has said sometime between now and the next 100 years, they may put in a lake and Rob's going to be ready. Is that about it? I don't think any of that is true, actually. None of that. Are you suggesting they make things up on this program?

Well, maybe. 800-525-7000. Let's begin St. Charles Moe. Hi, Lisa. What's your question or comment today for Rob? Well, good afternoon.

Thank you for taking my call. My question is this. My husband is 70 years old. He is a 50-year heart patient. We do. We are enormously blessed, but I handle our finances. And he's been urging me to refinance our two-year-old home purchase, which is not a bad idea.

I like it because if he were to pass and I were to lose his monthly income, my outgo would be lower. Yeah. Yeah.

So you're just wondering whether that makes sense in this environment, Lisa? Yes, sir. Okay. Tell me a little bit about the mortgage that you had.

I heard you say it's two years old. Was it a 30-year mortgage when you started? Yep.

4 and 3-8. And I've always put an extra amount every month onto the principal. Okay. All right. Very good.

And you plan on staying in this home for quite a while. Is that right? God willing. Okay. All right. Very good.

Yeah. You know, I think the opportunity here is that you perhaps could go ahead and lower that interest rate. You know, right now, it's not uncommon to see, you know, 2.875, something like that. I know average mortgage rates dropped just again.

I was reading this morning to just below 2.9%. You want to find one. You're going to need to shop around where you don't have any points on the front end. There may be a small origination, but you'd really want to compare the costs. I think the key is, you know, given that you're just two years into this, you know, you're probably going to end up starting over with a new 30-year loan. But with that lower interest rate, you know, will likely see a reduction in the payment. I think the key is just making sure that this home and the new payment fits well within your budget, even if the Lord were to call him home. And just recognizing that if you were to make a decision that you had to move because the resources just aren't there, you could end up having this affect you negatively in the sense that you wouldn't have paid back the cost of the refi in the form of lower interest, because it's going to take several years for you to cover the cost of the refinance before you are kind of back in the money, so to speak. And at that point, then you'll definitely save over the life of the loan. But if you were to sell this and move on, maybe you decide to rent something or you downsize or you're looking for something with less maintenance or just less overall expense, then, you know, that's something you really need to consider. So I might go ahead and work through your budget. What would that look like if you didn't have his income, but you did have this new lower payment? You know, one rule of thumb we look at is to say, I would like for this principal interest taxes and insurance payment on the mortgage to be less than 25 percent of your take home income, whatever that might be from all sources. And that's just kind of a general rule of thumb that says, OK, then we'll have enough left over to do all the other things, cover our bills and expenses and discretionary spending and giving and whatever else might be in the budget. So I just want you to think long and hard about it and do some forecasting in the future to make sure it would still work for you. And if you believe it will and you feel like the Lord would have you to stay there, then I think you really need to shop around. Bankrate.com would be a great place to go to look at some of the online mortgage providers.

But then you could also check with a local mortgage broker, perhaps one recommended or in your local church. Lisa, we're glad that you called today. Glad you got through. Thank you very much. Let's try to squeeze in one more before the break. Sakura is in Aurora, Illinois, listening to our good friends at W MBI. And what's on your mind today, ma'am?

Hi, good afternoon. Thanks for taking the call. We are a primary home and we are going to sell our townhome, the second home. And I was wondering, as I roll over the profit that we make from that home, will I avoid paying taxes on that?

Yeah, well, there's something called a ten thirty one exchange. It gets its name from section ten thirty one of the IRS Revenue Code. It basically allows you to avoid paying the capital gains when you sell an investment property. Of course, this isn't necessary when it's your primary residence, meaning you've been in it two out of the last five years because you have that two hundred fifty thousand or for a married couple, five hundred thousand in profits exemption where you wouldn't pay any capital gains. But for a second home, an investment property, you absolutely can reinvest the proceeds from the sale into what's considered a like kind property. And, you know, there's pretty broad rules on what that means. I mean, if it's rental property to rental property or investment to investment, that should cover it.

And you need to do that. There's certain time periods whereby you would have to actually identify the property and then actually get the money in in the form of a closing. So that would be the way to do it. Sakura, are you planning on buying another investment property? No, we have a primary home. And initially I wanted to sell that home back in 2008, but I wasn't able to. So I just want to roll that money into our existing home. OK, so then that's not going to work because you would need to roll that into a like kind property and putting that into your existing primary residence would not qualify under the 1031 exchange. So that means you are going to have some capital gains.

That's not the end of the world. You just need to plan for it. And so I would visit with your tax preparer.

If you don't have one, I'd seek one out. What they're going to determine is what is your true gain on this property, subtracting the selling price from your original purchase price, any improvements as well as the transaction costs and come up with the true net profit. And that will be subject to capital gains tax and they can calculate that for you.

Certainly you don't want that sneaking up on you. I'd go ahead and figure out what that is now so you can set that money aside. You're probably going to want to make an estimated payment on that now as well. Sakura, we hope that works for you.

Thank you very much. We're going to pause here for a brief break. Then we'll come back and speak with Greg, who wants to know about credit card protection. Agatha is unsure of what her 30 30 year term insurance policy is really all about. We'll try to help these people and perhaps you.

Eight hundred five to five seven thousand. Stick around. This is MoneyWise Live. The financial wealth you leave behind could be the best thing that ever happened to your loved ones or the worst in splitting heirs, giving your money and things to your children without ruining their lives. Ron Blue explains why it's important to make these decisions now instead of forcing your heirs to do it later.

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He's God. But God's sovereignty is never apart from his reason. God does not do anything without reason. Just because man cannot earn it doesn't mean God has no reason. Does that make sense?

We're adding up two and two and we're getting twenty five. No, there is absolutely nothing. It is all God's doing is absolutely nothing man can do to earn it, deserve it or somehow have something seen in them that attracts God to them. It is all in God.

It is all in God. But his sovereignty does not mean he has no reasoning. Doesn't mean he doesn't have any thought process. Doesn't mean that he just gets to do what he wants. He just just does what he wants because it's just God that he gets to. See, we can't see this apart from the fact that the word over and over and over calls him a just God and a wise guy. You've been listening to Beth Moore with a quick word. There are two ways to experience a study of Galatians.

You can join Beth for the online experience releasing September 15th at Beth Moore.org, or you can join us in January 2021 for the release of the printed workbook edition. Money and life run on the same track. But unfortunately, sometimes it seems like your money is heading in a different direction from your goals. In Never Enough, Three Keys to Financial Contentment, author Ron Blue helps you to break down all your financial options to a basic four and then shows you how to keep it all chugging along in the right direction on the same track. Never Enough, Three Keys to Financial Contentment, available when you click the store button at MoneyWiseLive.org. Good to have you along today.

It's MoneyWise Live. We hope it's a great day wherever you are. And we're doing fine because you're out there.

This is a call in program. Without your phone calls, we just wouldn't have a whole lot to do or say. So thank you very much for your participation.

Covington, Indiana. And Greg, what's your question for Rob? Yeah, my question is this. In this world, high tech world, fast changing world, I hear about hacking, deception and just information overload. My question is this. Do I need to have one of these credit card protection programs like LifeLock? Is it something that makes sense or is it one of these things that I could do without?

Yeah, well, it's a great question, Greg. And a lot of folks are growing more and more concerned over identity theft and compromised accounts because we hear about it so frequently. The scammers and fraudsters are very good at what they do. But at the same time, the credit card companies and financial institutions are upping their game at the same time. And so it's a back and forth.

And I think it's here to stay. I don't think it's necessary unless you're in an unusual situation where perhaps you've already had identity theft or something like that. Keep in mind, Greg, you have two forms of credit protection already, whether you know it or not, both of them free. The first is you're only responsible for the first 50 dollars if your card is lost or stolen and the thief uses it. If you report it before it's used, you're not responsible for any fraudulent charges.

And certainly as soon as you see him try to get that in on a timely basis. One of the main reasons, though, people use a credit protection services for what are called credit alerts, where you get an alert if somebody applies for credit in your name. This, though, is often limited to some of the upper tier plans, which can run you upwards of 30 dollars a month. And that's where this second level of protection comes in.

That's absolutely free. And that's called a credit freeze. You'd have to do it with each of the three bureaus, Experian, TransUnion and Equifax.

But essentially, it blocks access to your credit reports, which is protecting you against scammers attempting to open a fraudulent account, because in order to do so, they would have to impersonate you and your credit would need to be checked, which it wouldn't be able to be without that PIN number. So I would encourage you to start there monitoring your accounts on a monthly basis to make sure you don't see any activity that's suspicious. Number two, placing that credit freeze on each of the three bureaus, which by the way, is no cost.

It's absolutely free. And then number three, you're going to want to pull a copy of your credit report. I'd recommend you do that at least quarterly just to scan it, make sure there's no new accounts or inaccurate information.

But in my view, again, unless you have an unusual situation where you've already had something real severe happen, like identity theft, I think for most folks, if you're doing those things, as well as just general, you know, good habits with regard to online transactions, never doing business from public Wi Fi, using a password manager and changing your passwords regularly and you know, those types of things, then I don't think the credit protection is necessary. Does that make sense? Oh, it sure does.

Because there's a lot of dishonest people out there. And they're, they're pretty sharp. And I thought I should ask because it's just not good enough today to do what I did last week or last month, I've got to, I've got to stay up with things. And things are definitely changing and fair. So that's good information pulling that all together. All right. Very good, Greg. Well, listen, if you have other questions along the way, give us a call. And by the way, one more quick one.

Never click a link in an email you get I don't care if the logos there from somebody you're doing business with just don't do it. Okay, because that's the oldest scam in the book. Hey, we appreciate your call today. Thanks, Greg.

Great question. Cleveland, Ohio, Agatha, what's on your mind? Thank you. I bought a house in Cleveland for $69,000 in 2002. It's a beautiful home. The neighborhood is changing. I'm getting ready to retire. And and I, I have questions about it.

My son wants to sell my home as is. But I have beautiful things. And I think he would just bring a truck. You know, old people are hoarders. I'm 69. And just throw myself in there.

But I have stuff that people can use, especially at a time like this. Plus, I love the house. But I'm a burden to him because he's my only son. He's like in his 30s.

And he's concerned about me. So I want to know, I work for the post office, I'm going to have good money coming in. I wanted to buy the house.

My thing is 6.5, which is ridiculous. But Wells Fargo is they bought it from Washington Mutual. So Cleveland has a heritage home program where I could get 1.4 financing to do some things while I'm still here, getting the house together so my son doesn't have to feel. Yeah.

Okay. Well, Agatha, I certainly appreciate your situation. I think the key is making sure that you can afford the home. And then if you can and you feel like you're going to stay here, then it would be worth refinancing.

You can get a much lower rate, assuming you have good credit and income that can be documented. And I would look at doing that. You stay on the line. We'll talk a bit more off the air about what you need to know. We appreciate your call today.

Indeed, we do, Agatha. Thanks. You hang on the line there. This is MoneyWise Live.

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MoneyWiseLive.org. Let's go out to Pueblo, Colorado. I love Colorado, though I understand that they had a snow emergency or something just a few days ago, so you never know.

Idrisa, thank you for your patience, sir. Was the snow in your area or was it further north or don't you know? Yeah, there was snow yesterday, but it's cleared up now, probably in the mountains. Yeah. Oh, super.

Hey, how can we help you? I understand you. You're thinking of spending a lot of time in school, huh? Yeah.

I'm just wondering what the best financial investment would be as far as continuous attending school for 12 years or investing and becoming a homeowner in 10 years. Hmm. Wow.

Those are two big decisions and they're quite different. So tell me as you think and pray through it, Idrisa, what God has for you, kind of how he's wired you, what your passions are, how that intersects with what you're gifted at. Where do you feel like he's taking you and what have you been thinking about pursuing in the way of your profession? So basically what drives me is just being of service.

And right now I'm presently working with a company called Colorado Blue Sky and we work with the developmentally disabled. And I've been doing that for five years now. And the thing about what challenges me about going to school for 12 years is that I'm not a spring chicken anymore. I'm about 31 years old. And I'm thinking if I can basically save enough money for those 10 years, I can be a homeowner and do more of God's work for the remainder of my life and just have a focused life on it.

Yeah. And what is it that would require 12 years of schooling? What is it you're considering?

So I'm hoping to at least go as far as master's in psychology. Okay. And would you have to borrow for all of that or do you have the money for it? So I would work two years before starting and that money that has been saved for those two years is what I was going to put towards that school. Okay. Do you have a sense of what the total cost would be and what you might graduate with in the form of student debt?

Without accruing debt, I think I'll be able to, at a bachelor's level, I'm looking at probably $40,000. Okay. All in. Is that right? Yeah.

Okay. Well, you know, I mean, my team tells me that the median salary for a psychologist is around $85,000. Certainly on the low end, it could be, you know, around $40,000 to $50,000.

On the high end, $125,000 plus. So I think the key here is we certainly wouldn't want to borrow more than you would expect to make in your first year's salary, which means that you should be able to pay it back within 10 years. I'd prefer you borrow nothing.

But if you have to borrow something, the key is to do it in a way that's manageable and consistent with your earning potential after school. So at that point, I think it's really just a question of where is the Lord leading? And that's something that I think you need to give earnest prayer. I would be talking to those around you who know you best, perhaps who could speak into your life. What do they see in you in terms of your gifting and how God has wired you?

What really gets you passionate? I heard a bit of that passion in your voice, just as you described what you've already been doing. And perhaps getting that formal training that masters in psychology would allow you to take that to the next level.

That seems like a realistic plan to me. And the fact that you're going to save for the next couple of years while you're already working to put that toward your education and graduate with what I would call a manageable amount of debt, given what you would expect to earn as a licensed psychologist, makes a lot of sense to me. What I'd like to do to perhaps help you in this decision making process, there's a tool out there called Career Direct. And it's basically an assessment that's going to allow you to uncover God's wiring in your life. I'd like to send you a license for that free of charge, just as our gift to you, that you can go through, complete that, and perhaps that, along with your prayer and conversations with others who perhaps have already pursued this line of work, as well as friends and family around you, will allow God to clarify where he's leading you. I love the idea of you being a homeowner, but investing in your education makes a lot of sense to me. So Idrisa, if you'll hang on the line, we're going to get your information, and we'll get that Career Direct assessment out to you right away, and I think it'll be a real blessing. But Idrisa, we don't have to tell you, so I guess I will anyway. Take your time with this, make sure you pray a lot about this.

No situation or change in your career is irreversible, but obviously at your age, you want to make a couple of good moves so that you don't have to go backwards and start over again, and something totally unrelated. So be sure you spend plenty of time praying about this, ask your pastor and your church to pray with you as well, and we will as well, let us know how things work out. Thanks so much.

Let's try to squeeze in one more, Dade City, Florida. Susanna, how can we help you? Hi, thank you so much for taking my call. So my husband and I, we're kind of at a, I don't know, we're not really sure what to do in regards to possibly selling our home and purchasing a new one. We've been in this house together for 17 years, raised our children in here, and unfortunately found one of our children deceased in his bedroom in May. Yeah, so yeah, it's been tough, and we've battled with selling the house before, come to a conclusion we wouldn't, because my husband would be retiring in about eight years, and we would own the home. Now I won't be retiring for another 18 years, and so with this tragic event in May, it's just like, we're just not sure, because financially we want to be responsible, we would own our home, but it just seems like we're ready to start a different chapter.

Yes, yeah. I can certainly understand that, and boy, my heart goes out to you, Susanna, for what you've been through this year. What is the financial decision you're considering at this point? How can we help? So we would either A, own our home in eight years and be debt-free from our home, or B, go out and purchase another home, which would most likely, we would not have the equivalent financial, we would probably own more on the home that we purchased. It just seems like everything that we have in this home, we kind of want to trade in for something, an upgrade if you will. We love the water, we want to live by the water, and that just comes at a financial cost. So we wouldn't own our home in eight years, we'd probably still be paying on it until I retire. Well I think that always comes down to a couple of things.

Number one, you've got to give it a lot of prayer. If the Lord has given you a real conviction to remain debt-free, then I would do that. But if you feel like you have the freedom to borrow and have an obligation out there, which I think is permissible in Scripture, then it's a financial question. And I'd say use 25% of your take-home pay as a guide at the most for principal interest taxes and insurance. Stay on the line, we'll talk a bit more off the air. We will, and we'll take some more calls at 800-525-7000.

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Your free Money Wise e-magazine subscription is waiting for you at MoneyWise.org slash sign up. Pleased as punch to have you with us today on Money Wise Live. We have a number of calls. I'm not sure if we'll be able to get to all of them today, but let's give it the old college try.

Akron, Ohio. And Carol, how can we help you? Hi, thank you for taking my call.

I appreciate it. We have been praying about doing a room addition, not a sunroom. I just heard you talking about that. We got estimates on that and that definitely was not worth it. So we decided we could look into making it an actual addition to our home. So our prayers and discernment is, should we really do this?

Because we feel like our hearts and motivations are right. We have small group here. We have a small ranch home. We have our small group. We have kids that live all out of town.

So when they come back with and they're having babies now, it's pretty tight. So we would just like one extra room in the back of our home. As we have looked into it, we thought about the fact that we only owe about three more years on our home and it would be paid for.

We would have to take out a loan and it would probably be with the whole thing, siding and gutters included, probably around $70,000 to $75,000. So going back into debt for that, we know we might not get that out of it, but we plan on staying here and enjoying our family and church people with that space. But the question I have is today, right before your show came on, and I wasn't even thinking about your show, but I happen to be calling banks today so I could learn about what my options were.

So my questions are, if we do it, first of all, what's your thoughts on doing it? Secondly, the bank told me the equity line of credit, a refinance or cash out, or a home equity loan were the options. But fewer people go with a home equity loan, even though it's a fixed rate, because they felt the equity line of credit was better to borrow against the equity of your home. And then you can just leave that line open and you'll use it or not. But it's a variable rate, so I don't really know. Yeah, Carol, I like the direction you're headed. You know, adding an addition to the home, I'm seeing that you could typically expect to recoup as much as 80% of that, because keep in mind, you're adding a full-fledged, as long as it's a bedroom with a closet, then you're adding another room to the house, which is going to be significant in terms of you selling it.

So I don't think there's any problem there. I love the fact that you're nearly debt-free on your home, three years. Congratulations on really prioritizing paying that off. And so you have good equity, as long as you've really thought through the budget, making sure you can afford to pay this off in a reasonable time period. I'd probably look at a 10-year term on this.

And as you have been, I would accelerate the payoff on it. And I think the rationale makes a lot of sense. You know, it's not just a financial decision.

This is where you live. And so being able to enjoy that, as you said, using it for ministry, I love that. And being able to enjoy your family coming back from out of town and having a little bit more space so they can stay with you.

All of that makes a lot of sense to me. I would go with the home equity loan, even though it's probably not what the bank is going to push as the first choice. You don't need this open line. You know, moving forward, you really just need a set amount of money. I'd get a general contractor who can give you a guaranteed price, make sure you borrow the amount that you need, and make sure again, you keep that term reasonable and try to pay it off just as quick as you can. I would go to bankrate.com. That's a great website to really evaluate who's got the most attractive rates with the lowest closing costs. I'd look for one with no closing costs.

They're out there. And I think in this low, low interest rate environment, really unprecedented interest rate environment, Carol, I think locking in at that fixed low rate on a home equity loan with only the amount that you need, and then paying it back as quick as you can makes a lot of sense. Again, also count the cost, make sure you put it into your budget, then make sure it fits. And let me just take this opportunity to mention our brand new Money Wise app, which could be helpful to you.

If you go to your app store and search for Money Wise Biblical Finance, you can download our new app, which will help you put your budget in and make sure everything's going to fit well. But I think that's the direction I would head and we'll certainly be thinking and praying for you as you proceed. Carol, thank you very much and enjoy those new grandbabies as they seem to be coming along, which Marcia and I are fairly new grandparents and who would have thunk that we would need space someday, not only for when our children might come back, but for when their children need some extra space. So this is, God always has surprises, doesn't he?

He sure does. And something tells me that you're probably more concerned about having room for the grandkids than you are even your kids, just the way you talk about those. I have granddaughters. I have granddaughters.

They are so special. I've got pictures here. I'll show you. Oh, I know you do.

I've seen them. Well, you don't have to be rude about it. Orlando, Florida, Latoya, you're on with Rob. Go right ahead. Hi, Rob. Hi, guys. Good evening. How are you? Good. Thank you.

I'm good. My question is the company I work for, I just recently found out that through the pandemic and everything, the government has allowed for us to, through the CARES Act, withdraw from our 401K without having that early withdrawal penalty because, of course, I'm not at that age yet. And I do have student loan for myself that I started my master's and a portion of it for my son who just finished college. And I wanted to know if it was a good idea to take out what was required to pay off that student loan, seen as right now I'm paying that almost $400 per month just in student loans combined.

Would it be a good idea to take out and just pay the taxes on that when that time comes next year? Or should I just leave it and continue paying the student loan? Latoya, what do you owe right now on your student loans total?

I owe about a little bit under $15,000. Okay. And are you paying more than the minimum payments?

Sometimes when I can. Yeah. And have you run an estimate on how quickly you think you'll pay this off in full just on your current trajectory? No, honestly, I haven't. Okay.

I'd look at that. You know, pulling money out of your 401K is usually the last thing we encourage folks to do. It's some of the most expensive money you have access to. And I agree with you, the CARES Act does waive that early withdrawal penalty and it gives you three years to pay the taxes. And if you pay it back, you can file an amended return and actually get the tax back. And all that's great because you wouldn't have that added 10% penalty, but it is going to be taxable to you. So whatever you pull out is going to be added to your taxable income for the year. And I think perhaps even more than that, that was money that you put aside to be there down the road.

And so this is money that's no longer going to be compounding for you year after year so that when you get to retirement, you have something there for you to supplement Social Security and other income sources. So I think I'd prefer you just to keep your lifestyle lean, try to go back to that spending plan or that budget, look for areas to cut back so you can increase the margin. So perhaps you can consistently month after month be able to put some money against that student loan over and above the minimum payment. Just get that paid off as quick as you can. $15,000 is a lot of money, sounds like a lot of money, but it's manageable. And if you stay focused on it, I think you should be able to get that paid off in a reasonable period of time and still have your 401k intact.

So I'd probably pass on that option and let's go back to the family budget and really focus in there. Latoya, we're glad you got through today. Thank you very, very much. And I think we have time for one more. So let's stay in Florida, Ocala. Julius, what's your situation, sir?

Thanks for taking my call. I'm in the trucking industry and I'm currently being paid by or through my employee or with a 1040. I'm getting ready to switch to another company and under this company he pays with the 1099.

My question is, I want to know the pros and cons of the 1099 as opposed to 1040. And if I should open a LLC, so would I be considered a contractor to him? And now should I open a business and contract to him since I'm coming under 1099? Yeah, well, you know, forming a C Corp can be really beneficial to you, Julius, you don't get the you miss out on having to pay some of the taxes that you would as an independent contractor, you can expense certain things against that.

And you can take part of it as a distribution of profits, as opposed to taking all of it as salary, which has some added tax benefits. So I would consider that given your line of work, just to see if the added cost of maintaining the corporation and the annual filings outweigh the benefits that you could receive by having your own corporation, which would be what your employer pays moving forward. Let me recommend because this gets somewhat complex, and it's really dependent upon your unique circumstances and situation, recommend you connect with a tax preparer, or a CPA there in Ocala. If you don't have one, you could go to our website MoneyWiseLive.org, click on find a CKA and I'd look for one in the tax and accounting area and just pay for some time. Perhaps this could be your tax preparer moving forward. But if not, just somebody who could help you evaluate the pros and cons, because you wouldn't need to set up the books, you'd need to keep it separate, you need to do it right. You need to make sure you get the annual filings done, but you want to fully understand what the benefits are from a tax standpoint, and they could be significant. So I think it's worth looking into.

It's a great question, though, and let us know what you decide down the road. We appreciate your call today. We do indeed, Julius.

Thank you very, very much. And Rob, almost out of time here. We've had a lot of housing questions today. Our opening topic had to do with remodeling your home when it comes to buying a house.

And I know you've had a few in your life so far. What's the key? What's the primary mistake you don't want to make when it comes to buying, whether it's your first home or your third home? Yeah, well, I think the key is trying to buy too much house. And especially in this low interest rate environment, we can be encouraged to go out and perhaps buy more house than we really need. So don't start with the neighborhood.

Don't start with anything else. Start with that budget and make sure that you can certainly keep that payment principal interest taxes and insurance less than 25 percent of your take home pay. And by the way, if you don't have a budget, Steve, great time to mention our brand new MoneyWise app, which if you haven't downloaded it, you need to just go to your app store, either Apple App Store, Google Play, search for MoneyWise, biblical finance. You can download it today or you can go to app.moneywise.org and read about it there.

But great resources. Not only can you track your budget, but you can listen to the program there as well. Rob, always a pleasure, sir. Thank you very much. We'll come back tomorrow and do it all over again. I look forward to it. All right, thanks. MoneyWise Live is a partnership between Moody Radio and MoneyWise Media. My thanks to our technical crew today in Chicago, Amy, Deb, Gabby T and Rich R. For Rob West, I'm Steve Moore. Drive carefully, wear your mask. Join us again tomorrow for another edition of MoneyWise Live.