Should You Pay Cash or Finance Your Replacement Window Project on Long Island?
You know you are ready to replace windows and/or doors in your Long Island, NY home, but you aren’t sure if financing the project or paying cash is the best choice for you. This isn’t one of those one-size-fits-all decisions. There isn’t really a “better than” or “worse than” scenario that would apply to every homeowner. There are a number of factors that you should take into consideration, starting with your financial situation, but also your reasons for choosing to upgrade or replace windows and the size of your project are also considerations.
You should have all the information you need to make a wise investment decision at your fingertips before you decide one way or the other. Here are a few options to consider.
Do you plan to replace all of your windows and doors or just a few?
If you have cash available, and only want to replace one or two fixed windows with operable awning-style windows or install a French hinged door to replace your aging slider, paying cash might make the most sense for you. Interest rates on savings are really low in New York today so the average return on savings is less than 1 percent for most New York residents (0.170%). The sooner you replace inefficient, aging windows and doors, the sooner you can start saving money on your power bill.
Where is your cash coming from?
There is cash – like money in a savings account – and then there are available cash options. Available cash options include accessing money from CDs getting ready to mature, cashing out an IRA during a job transfer, and borrowing against life insurance policies.
Certificates of Deposit
If you’re considering cashing in a CD early to pay for a large-scale replacement window project in your Long Island home, you need to consider the cost to liquidate. Early withdrawal penalties vary from bank to bank, but almost all banks have similar structures.
- The penalty is higher if you recently invested in the CD.
- Penalties are based on interest rate and term length.
- You don’t lose any money than what you originally deposited, only a percentage of earned interest.
Before you cash out a mid-term certificate of deposit, explore options with your financial institution about borrowing against your CD. Loan rates are typically 1 percent to 2 percent above the earning rate.
Using a CD as collateral for a short-term loan might be beneficial if you expect to be able to pay off the loan in a shorter time than the term of the CD – for example, you could use a seniority bonus or extra money from an anticipated raise at work.
Whole Life Insurance and Financing Window Replacement Projects
If you have a Whole Life insurance policy, you might consider borrowing against the policy to take advantage of discounts for cash payment. Here’s what you need to know about borrowing against a policy.
- Expect to pay a recovery fee called surrender charges. Insurance companies charge this fee to recover part of their administrative costs associated with the policy.
- The loan rates are typically low compared to market averages.
- Unless you quickly return the money – pay off the loan – your beneficiaries won’t have the benefit of the full value of the policy if you die before you repay the loan.
- This is an option better suited to people who have had their policy for at least 10 years.
Cashing Out Retirement Accounts
Cashing out an IRA or other retirement investment vehicle is risky; sometimes it costs more than any other options. Before you chose this path, consult a financial advisor to discuss tax consequences and penalties. You could lose 20 percent to 25 percent of your cash on taxes and fees if you withdraw early. The closer you are to retirement age, the higher the risks associated with this option because you have less time to rebuild your accounts for the future.
Does Financing Offer More Flexibility and Benefits?
When you don’t have enough cash to complete a major window and door replacement project, and you don’t want to split the project into several smaller projects, financing does have some benefits.
- Refinancing your home offers tax advantages that personal loans and credit card buying options don’t, if you are eligible to itemize deductions on your federal tax return.
- Interest rates for borrowers are very low in Long Island today — between 2.75 percent and 4.99 percent in most areas.
- Cash limitations might mean you choose window styles and features based only on the price, which could limit your decorative preferences.
Renewal by Andersen of Long Island Has More Information About Financing Your Replacement Windows
We know that making wise investment decisions is important to you. We invite you to call Renewal of Andersen of Long Island NY for more information. Our financing specialists are available to discuss in-store financing and cash payment options for homeowners. Reach us at 1-877-313-9052 or complete the form and we will be happy to contact you to schedule a free in-home consultation at your convenience.