Upgrades Paid Upfront vs. Rolled Into Mortgage?

Reply Tue 3 Jun, 2014 06:47 pm
Hey guys, question about what to do regarding the cost associated with upgrades for my upcoming townhouse purchase

Version A: Rolling upgrades into mortgage

Purchase price w/ upgrades: $455,258
Mortgage w/ upgrades: $364,200

Down payment (20%): $91,058
Mortgage payment: $2941

Version B: Paying for upgrades now

Purchase price: $428,990
Upgrades cost separately: $26,268
Base mortgage: $343,150

Down payment (20%): $85,840
Mortgage payment: $2791

...so my question, which version makes more sense? If I roll them into the mortgage, it will cost me about $5000 more in a down payment and $150 more a month for my mortgage? However if I don't, the upgrades will cost me $15,228 today.

Please advise and let me know if you need any additional info to clarify which choice is best.


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Reply Tue 3 Jun, 2014 07:04 pm
If I were you, I would pay the upgrades up front now and not roll them into the mortgage. Why? 'Cause you're probably going to be paying a higher interest rate into the mortgage versus what you'll get for saving that $15k+

Savings interest rates are lousy these days. Unless you're an experienced investor and can get a better return than whatever you're going to pay in mortgage interest, then the better bet is to keep the mortgage as low as possible.

Roger? CI? TTL? What do you think?
Reply Tue 3 Jun, 2014 07:12 pm
Your upfront cost is $91K vs $112K. The real question is what are you going to do with the $21K if you don't put it into the house. You have two things to consider here. Do you have the cash flow to handle the higher payment? If you do and you can get more interest on your $21K than you pay on your mortgage then you are better off borrowing more money. If you can't handle the payment, then you have to reduce your payment to something you can handle.
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Reply Tue 3 Jun, 2014 07:28 pm
I agree, especially when considering the rates on savings and CD accounts. An opposing consideration might be that business interest is a deductible tax expense, but that would probably not tip the decision the other way.

Where is Peace & Love when we need her?
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Reply Wed 4 Jun, 2014 02:01 pm
Thanks for the feedback! That pretty much aligns with what I was thinking. Much appreciated for the help.
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