If you've been living in your home for a while, you might begin to think it's time to pack up and move. But if you don't have the budget for a new home or simply don't want to even think about the whole process - sell your current home, buy a new home, pack, move, unpack, settle back in - then you might consider renovating your home. How can you determine which will work best for you? Here, we discuss some of the things you need to consider that will help you make the right decision for you and your family.
Things You Should Ask Yourself
- Do you like the area you currently live in? You can buy another home in the area, or you can renovate your current home.
- What is your long-term plan? If you are currently in a 2 bedroom home and plan to have a large family, you might consider moving to a new home vs trying to make a smaller home work for you.
- Do you have the budget for a renovation? In more affordable areas, it might be cheaper to buy a new home. In more affluent areas, a renovation might give you a bigger bang for your buck.
- Do you want to change your floorplan? If your renovation will not require structural changes, you can save yourself up to 50% of a renovation budget. But if you're thinking of tearing down walls and relocating bathrooms, a new home might be the way to go.
- What will a renovation do to my home value? Some renovations will increase your home's value, but others will unfortunately be money down the drain. It all depends on the market in your area, talk to a real estate expert and a remodeling expert to find out if this is worth your investment.
- How is your mortgage affected by a move? This also depends on market conditions - interest rates remain low, so a new mortgage might lower your payments, definitely something to talk to your mortgage provider about. Keep in mind that if you move to a different area, your property taxes will most likely change - check with the city or with a real estate agent to find out how your taxes may be affected by a move.
The answers to these questions will help you figure out which option is best for you. If you need more information, continue reading to find out some of the pros and cons of these decisions.
Buying a New Home
Selling your current home and buying a new one can be a long process but it will most definitely have an exciting end when you get the keys to your new dream home. You must have your game face on and be ready for a marathon, not a sprint!
1. A new beginning. There is nothing like the excitement of moving into a new home! Whether it's a new area or a bigger home in the area you currently live in, it feels like a new chapter in this fun roller-coaster we call life.
2. Financing. Whether this is your first home or second or third, the process gets easier each time. Especially with the help of a trained real estate professional who will help you navigate the entire process.
3. Taxes. When you sell your old home, you could land some extra money in your pocket without having to pay extra taxes thanks to capital gains exemptions (up to $250,000 for single taxpayers and $500,000 for married filing jointly taxpayers). There might also be tax credits for your new home, like eco-friendly tax credits. Check with your tax professional.
1. High costs. Selling a home involves paying your real estate agent, title/escrow, and other fees throughout the process and can get expensive. Definitely something to consider and be prepared for.
2. Moving. Moving can be hard. Packing up, getting rid of old stuff you haven't used in years, unpacking. It can get stressful.
While you feel that your current home just doesn't meet your needs anymore, remodeling allows you to update an obsolescence and make it into a new space or updated function. It all depends on your budget and what you are looking to do.
1. Cost. The cost to remodel your home is less than having to buy a new one because you are dealing with a specific room or rooms. You don't have to do a top to bottom remodel all at once, and instead you can tackle one area at a time depending with your budget.
2. Personal Touch. This is your blank canvas. You get to decide and make the area exactly what you want it to be. A new home does not give you this advantage as you may find some things you like and others that you don't.
1. Major overhaul. If your current home needs a major overhaul, it might not be within your budget to do so. It might actually be cheaper to buy a new home. It's much better to change a few rooms in your current home instead of the whole thing. This doesn't really work if you are trying to downsize either.
2. Financing. Whether you are using a home equity line of credit, a home loan, credit cards, loans from family you will have an additional monthly payment to deal with. You also have to make sure that you are staying within this budget and not going over budget with your renovation.
3. Construction. If you ask me, this is the hardest part of a renovation. Your home will be a construction area for weeks - if not months - at a time. You need to be prepared to adjust your living situation while the construction is underway. Whether you move into a hotel, stay with family or friends, or tough it out and live in your home while it is being remodeled. It requires a lot of patience, and not all homeowners have it.
What is the best option for you? Everybody is different and everybody will have different opinions regarding the advantages and disadvantages of buying a new home vs remodeling. Whichever you choose, make sure that you get the financing sorted out first, contact the appropriate professionals, prepare yourself for an adventure, and enjoy the ride.