Are you running out of space in your home? Is your family outgrowing your home? Does your home not fit your needs anymore? Many people reach a point when they feel this way and have to decide the best way forward. Some people would rather invest in their current home and renovate or add on to the house. Others may prefer to just sell their current home and look for a new house that meets their needs. There is no one right answer for everyone, as to whether you should stay put and remodel or just move to a new home. However, there are several factors you should consider when making this important decision; we discuss them below.
Market Value of Your Current Home
One of the most important considerations is how much you could realistically sell your home for in it’s current condition. Would you make enough money from the sale (after paying the balance on your mortgage) to buy a new home that meets your needs and/or wish list? If not, then maybe a renovation is the best option.
Cost of Renovations
A contractor should provide reasonably accurate estimates for the work you would want done. If it only requires a visit or two and an estimate, that much should be free of charge. If you need architectural or structural drawings and multiple planning visits from a contractor, expect to pay for those services up front, even if you decide to move rather than renovate. Any work you can tackle on your own will also save you some money.
Market Value After Completing Desired Renovations
Once you’ve got a specific plan and a budget, you’ll need a realtor to estimate your projected home value after those renovations are complete. This, in conjunction with the previous two factors, will determine whether the renovation makes financial sense. Be careful not to “over improve” your home. If you spend too much or add things that don’t make sense for your home and neighborhood, you can have trouble recouping your investment, even over time.
Equity in the Home
The amount of equity you have in your home is the appraised value less the balance on the mortgage. If your home is appraised at $250,000 and you have a $150,000 balance on your mortgage, you have $100,000 in equity. You may be able to get a home equity loan or line of credit to fund part or all of your remodeling project. That can be an attractive option since you wouldn’t need to use any money up front, but be sure to fully investigate how that will affect your monthly payments and budget.
If you’ve saved a considerable amount of money or have money readily available, that can provide you the flexibility to renovate or move, after considering the previously discussed factors. You may be able to just pay for a renovation without borrowing additional money and incurring interest over the loan term. Or, the combination of available cash plus the profit from selling your home may make it easiest and most worthwhile to move.
You’ll want to make sure you think about other impacts on your family with both options. If you move, how will it affect your commute to work? School for your kids? Proximity to friends and family? If you stay and renovate, what impact will the remodel project have on your family, especially while the work is in progress? Do you have a sentimental attachment to the home?
When your current home is no longer the best fit for your family, there’s a big decision to make. There are always several options that will address your needs and no one choice is right for every homeowner. If you take these steps and have good professionals to guide you, you’ll make the right choice whether to stay or go.