Is it better to aggressively pay down my mortgage or aggressively save money for home renovation?

Asked by Froilan, New York, NY Tue Sep 30, 2008

In 2002, I have bought a 2,200 sf one-family fixer-upper brick townhouse in the Crown Heights area a few blocks from a subway station.

My mortgage is set at 5 3/8% for a 30 year fixed. The building is structurally sound after investing about $30,000 in structural renovation. New double glazed windows, new insulation throughout, new kitchen, new hot water heater, and a new bathroom were installed.

I still have about $20,000 to $30,000 worth of renovations in order to make the house attractive for resale (at the minimum). I am currently in a financial situation where I can pay off my mortgage by the year 2014 if I stop renovating. However, the house to a lay-person would look unfinished.

Is it better to pay the minimum monthly mortgage and use the rest of the money for renovations during a market downturn?

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Allison Long…, Agent, Brooklyn, NY
Sat Oct 4, 2008
Hello Fellow Crown Heights Resident!

I would suggest that you continue to renovate your home to make it comfortable for you while you are living there as well as increase the value of your home for when you decide to sell. Just make sure that the renovations you decide to do increases your resale value.

Since you have a reasonable interest rate and you obviously don't have any difficulty paying your mortgage, you might as well continue to enjoy the tax benefits of having a mortgage and living in a comfortable, beautiful home.

When you do decide to sell, you can contact me at or call me at 888-360-5757 x86
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Ute Ferdig, Agent, Auburn, CA
Sat Oct 4, 2008
Hello Froilan. First of all, congratulations on being one of the few people who are able to pay off their mortgage in the foreseeable future. In the current climate, that's a great accomplishment. Having said that, I would recommend that you do what needs to be done to make the house look finished. I don't know what it takes to do that. Perhaps you can use part of the money to make it look finished and the other part of the money to pay off your loan. It does not have to be an all or nothing decision. That's just a thought.

If you don't plan on selling any time soon, you may want to focus on paying off the loan and once that's accomplished, you can use the money you saved by paying off the loan early to make necessary improvements. If you don't mind living in an "unfinished house" in the meantime, I would think doing the improvements later might be better as they'll then also be newer and they'll add more value than if they had been done 5 - 10 years earlier. Good luck to you.
1 vote
Carmen Di Bi…, Agent, Nyack, NY
Wed Oct 1, 2008
Assuming you are living in the house, I suggest you make it comfortable and functional for your needs with an eye toward making it appealing to future homebuyers. Do not over improve the home as compared to similar homes in the area. Use good quality materials and hire licensed contractors. Make sure all CO's are obtained. Buyers appreciate and are willing to pay more for move-in condition homes. You have a low interest rate, your accountant would most likely suggest that you not pay down the mortgage but rather invest in your asset.
1 vote
Jolie Muss, , Upper West Side, New York, NY
Sat Oct 4, 2008
What are the additional improvements that you are thinking of doing to make it attractive for resale?
Can you do any of the labor yourself? Would any of these improvements greatly increase your and your neighborhood's quality of life? If it's landscaping consider putting in attractive but inexpensive perennials as these will come back (now's a great time to plant bulbs) and smaller trees and bushes as they will keep growing..It's a good idea to pay more towards your mortgage or at least put the extra money somewhere you can get it if you need it (but where it's safe and insured)
Let us know!
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ERIN, , Lafayette, LA
Wed Oct 1, 2008
continue renovations, make sure the items that you are spending money on will help increase the value of the property. proprety values will increse and your the intrest you are paying on your current mortgage is tax deductable! good luck!
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