Your family has grown — and now it's time for your home to follow suit. In this situation you're faced with two options: renovate or relocate? Both options can be exhilarating and exhausting, so there's no one right choice. To make a decision you'll be happy with in the long run, look closely at the factors that are most important to you and your family.
Ask yourself these six questions to figure out which path is right for you.
1. Are Both Options Feasible?
Both revamps and fresh starts require some type of investment. But if you've recently changed jobs or gone into debt, you might not qualify for a new home mortgage. If you've amassed home equity in your current house, however, you may qualify for a home equity loan or home equity line of credit that you can use for a home renovation.
You also need to determine whether city and neighborhood zoning and deeds allow you to build an addition or add a story. The latter also requires taking a close look at your home's foundation to see if it can handle the added weight and reinforcements.
2. Will Your Home's New Value Outweigh the Renovation Costs?
Even if you don't plan to sell your home now or in the near future, it's helpful to assess the impact planned improvements will have on its fair market value. If the benefits don't justify the costs, consider focusing on the home renovation that can yield a higher return on your investment, such as the kitchen or bath. In any case, work with a real estate agent or appraiser to assess your house's worth before and after the proposed updates to assess the financial impact of your remodel.
You may also want to consider the impact of an addition or renovation on your property taxes and home maintenance costs. If the improvements will increase your home's value, it's possible that the tax assessor will reassess your property taxes. You will also want to estimate the cost of maintaining (e.g., cooling and heating) additional square footage. Depending on your circumstances, these potential additional costs may have a significant impact on your monthly budget.
3. Is Now the Right Time to Renovate or Buy?
The economic climate should also influence your decisions. If you've been offered an appealing bid on your house and the forecast for your area is weakening, for instance, you might consider selling and moving to a more stable housing market. On the other hand, contractors may drop rates in tough times, reducing the cost of your desired updates.
Examine local housing forecasts to see what type of short-term growth is projected for your area before you decide to sell. You can also compare renovation quotes to encourage competitive bidding and gauge your bargaining power.
4. Will My Home Renovation Meet My Future Needs?
Assess whether your proposed home renovation will meet your family's needs in the long run. Do you plan to have more children? Might a parent move in? If multiple renovation projects will be needed over the next five to 10 years, buying a home that meets current and future needs could be the more cost-effective option.
5. What Are the Risks Involved?
Inconveniences, uncertainties, and time commitments must be factored into the equation. If you remodel, you may face higher-than-projected renovation bills from unforeseen complications, delivery delays, and furniture storage fees. You may be forced to eat out for weeks on end or even stay in a hotel for the short-term.
If you buy a new home, there's a risk that you'll find a buyer for your home before you have a new place picked out and before you've qualified for any financing. You could also end up paying the mortgage and other expenses for two houses if it takes you longer than expected to sell. Plus, you may discover you preferred your old place after the deal has already been sealed.
To determine which risks you are ready to accept, outline the best- and worst-case scenarios associated with each option and weigh the pros and cons of each. If either worst-case scenario seems unacceptable, it may be best to go with the other choice.
6. What Does Your Heart Say?
Your current home probably holds priceless memories. You may have been carried across the threshold after your wedding, posted your kids' heights on doors, devoted years to cultivating your garden or built lasting neighborhood friendships. If your home and neighborhood have a sentimental value, don't be afraid to factor that into the equation.
It's also important to remember that you can fix your home but not your surroundings. If you hate your commute or the early morning whistle of nearby trains, upgrading your home won't make those problems go away. If you're in need of a new location, it might be worth the extra investment to make a move.
While there are bound to be roadblocks no matter which path you choose, honestly examining your priorities — and your finances — will ensure you arrive happily at your final destination.
Apply for a mortgage with Regions today. Need help deciding? We can help you find the right type for you.
