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Should You Put Your Home Theater In Your Mortgage? Print E-mail
Wednesday, 07 April 2004

While the U.S. economy has been stalled for most of the last 3 years under the Bush administration one element of the economy that continues to party like its 1999 is real estate. Fueled by millions of new Generation X buyers along with 40 year-low interest rates, Americans are buying and upgrading homes at a record pace.

Both Gen X and Baby Boomer customers demand new luxuries from any home they would buy including professional kitchens, ultra-high tech energy efficiency and even state of the art home theaters. Builders ranging from mass market mega-companies to one-off custom contractors are now building in everything from home networking to home automation to media rooms into the cost of a house. The question is – is this a smart move for the savvy home theater enthusiast? Historically, lenders were adamant about not loaning money for quickly depreciating items like furniture and electronics. Now, as contractors build dedicated home theaters into rooms they have blurred the lines in ways so that lenders are more willing to agree to loan on. “The difference” as Southern California loan broker, Louis Mowbray tells it is “attached versus not attached assets.” A swimming pool or a new kitchen is attached to the home and stays for the next buyer. A simple plasma TV hung on a wall is easily removed and likely moves with the owner of the home if he or she moves. A dedicated media room with custom blackout drapes, an automated roll-down screen, theater seating and specifically designed acoustical material on the walls is far more “attached” than a traditional stereo system or TV from years past.

The more attached nature of media rooms and whole-home automation gives consumers new financing options when buying AV gear but Mowbray warns consumers to make careful decisions based on their specific financial situations. “For example people who would buy a $50,000 dedicated home theater (at today’s interest rates) should expect to have paid a little more than $150,000 for that same theater by the end of a thirty year loan. Their monthly payment might only be $60 higher because of the addition of the system.”

In terms of cash flow, $60 is very little to pay in order to have a very good $50,000 home theater or home automation system however audio-video industry public relations consultant and watchdog, Neal Melden warns that the temptation to bury your home theater's price in your mortgage costs you more than $60 per month - it costs you control over your system and its overall quality. According to Melden, contractors either install a theater themselves or hire glorified electricians to install your theater. While the financing might seem tempting, you are not always getting CEDIA quality installation for your $50,000. If you were shopping for a home theater and automation system on your own as you are building a new home or remodeling a space, you are in control of who you do business with, how the system is installed and how you get service in the future. Just because your contractor can frame your new house in 12 days doesn’t mean he can program the AMX in your wall to raise your screen, turn on the AC and lower the lights.

The change in financing options for consumers that offer compelling new opportunities for customers that simply weren’t available mere years ago must be considered an advantage. If you chose to pay for your theater as an attached element of the home, make sure you retain control of which installation firm you use for the project. Other options for creative financing of a complex AV system include paying for the physically installed elements of your theater such as drapes, installed seating, home automation, window treatments, acoustics, programming and beyond as part of your mortgage because these elements are part of the room. Then pay for the actual gear (preamps, amps, projector, speakers etc… ) which could be taken with you when you move. Another popular option today is to take a home equity mortgage to borrow against the equity of your home at very low rates (often as low as 4% these days) to pay for your theater. With the equity credit line in your house, you can pay down the home theater faster avoiding the three times increase in price Louis Mowbray warned about.

A consumer’s best bet is to stay creative and informed but beware of deals that seem too good. They likely are not worth your effort and money.

Bloomberg.com – good mortgage calculators
CEDIA.org – find a top installer in your area

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