Your home needs are changing—but does that mean it’s time to move or renovate? Sometimes, that’s a tough question. Comparing the benefits of both options is key.
Real Estate Agent or Contractor? How to Decide Whether to Move or Renovate.
You want a home that’s a good fit for your family. You could renovate your current place, or you could move. Which is the right option for you?
After living in your home for many years, you probably are looking to make some changes. Many longtime homeowners ask, “Should I renovate my current home or move to a new home?” The answer often revolves around financial, social, and emotional concerns.
Before comparing the benefits of moving and renovating, it’s important to understand how your home equity may affect your options.
Home Equity: One of Your Most Valuable Assets
The difference between how much your home is worth and the outstanding balance on your mortgage is your equity in your home. As you pay off your mortgage and your home value appreciates over time, your amount of equity rises.
To access your home equity without selling your home, you may be able to use a home equity loan or home equity line of credit (HELOC), which uses the equity you’ve built as collateral.
Once you understand your available equity, you can better evaluate whether renovating or moving makes the most sense for your goals.
Reasons to Renovate
Home renovations are more than great reality TV. Renovations can breathe new life into your home, create additional space for a growing family, or let you indulge in a hobby of home improvement. The right renovations can also improve the overall value of your home and make it a place where you can continue to live for years to come. Here are some additional top reasons to renovate rather than move:
Improve Your Resale Value
The right renovations can make your home more attractive to future buyers if you plan to sell it. Different upgrades yield different returns on investment relative to the expense of the improvement. In general, improving curb appeal, creating an open floor plan, and upgrading a kitchen and bathrooms offer the most resale value.
Age in Place
As we get older, what we need from our home’s changes. If you’re losing mobility or need a home that’s safe and easier to navigate, renovating can help you age in place and stay independent.
Repurpose Your Space
One in five homeowners feels house rich and cash poor. Some are tackling the problem by converting part of their home into a rental property, home office, or workspace for a small business.
One word of warning: Renovations often take more time and cost more than expected. If you renovate intending to stay in your home, make sure you plan to stay for at least five years. Otherwise, you’ll be spending a long time paying for a home you aren’t living in.
If you decide to renovate, you may want to use the equity you have in your home to pay for the project. A home equity line of credit (HELOC) or a home equity loan uses the value you have built up in your home as collateral for funds you can use to pay for renovations. A home equity loan provides you with a set amount of cash up front. A HELOC offers you a source of funds, similar to a credit card, that you can access as necessary. Fees and terms vary, but typically a home equity loan or HELOC will let you access larger amounts of money with more affordable terms than other financing choices.
Reasons to Move
As time goes by, you may find you need more from your home than could be accomplished by a renovation. Moving can be an exciting new change of pace. Here are other reasons to consider moving rather than renovating:
Satisfy a Personal Need
Sometimes a move is necessary for reasons that go beyond dollars and cents. Maybe your commute has become too long. Perhaps you want a new start after losing a loved one, or your children and grandchildren live too far away for you to visit them as often as you’d like. Whatever the reason, if your home no longer meets your social or emotional needs, there’s nothing wrong with relocating.
Find the Right neighborhood Fit
Your neighborhood matters, and sometimes neighborhoods – and neighbors – change in ways that don’t appeal to you. Making a move can help you find a neighborhood that fits you better.
Upgrade Your Lifestyle
As your finances improve, you may want a luxury home with more amenities. Renovating can accomplish some of those goals, but if you over-improve your home compared to surrounding properties, it could be harder to recoup your investment when it’s time to sell (the most expensive house on the block can have its value decreased by lower-priced homes nearby). If you want more luxury and you can afford it, moving could be the best option.
Downsize to Save
Selling a larger home and purchasing a smaller one makes sense for a number of reasons. You can lower your monthly costs for a mortgage, taxes, insurance, and utilities. Plus, you can exchange a large home that becomes difficult to maintain for one that makes living easier.
Take the Next Step
Reinvesting in your current home or purchasing a new one can be an exciting opportunity and an important financial decision. Before you call a contractor or real estate agent, take time to weigh your options and determine what makes the most sense for your goals and budget. If you’d like guidance on financing your next step, speak with one of our mortgage loan officers to explore your options.
