Whether it’s cheaper to renovate or move is not a straightforward question. Homeowners typically spend about $50,000 on a full remodel. Moving could cost just as much, or more, depending on your down payment, closing costs, realtor fees and other expenses.
Even when interest rates are rising, the real estate market can be favorable to sellers. If selling in this type of market, you could obtain a good return on your investment, but at the expense of a higher interest rate on your new home.
Financing a home renovation doesn’t have to be difficult, as there are several options, including home construction loans from traditional lenders like banks and credit unions. If you have equity in your home, you may also consider home equity financing.
Should you move or should you stay?
That’s the question homeowners ask themselves when their current home isn’t quite what they want.
If you’re contemplating this decision, then you must love at least some aspects of your current home. And when you’ve established equity in your home, it may be easier to finance a remodel than move.
Both external and internal factors can help you make this decision. Think about the current real estate market, your financial situation, the sentimental value of your home and the timing.
Many Americans consider moving the most stressful life event – even outpacing divorce and a death in the family. Moving requires you to find a home you like, set your kids up in a new school district, and learn a new commute, all in addition to the physical difficulty of moving your belongings.
Sometimes, moving is the right decision. Maybe the birth of a new child means you need to upgrade. Or sending your last kid to college might see you downsizing.
However, renovating your home can sometimes be the best option. Do you love your home but hate the kitchen? Is it time to update the flooring or create the outdoor space you’ve always wanted? These updates could increase your home’s value while improving your enjoyment of your space.
How to make the decision:
No matter whether you renovate or move, it’s going to cost money. Which choice costs more (and by how much) depends on your home’s qualities, the real estate market and your financial situation, among other factors.
Expenses involved in selling a home include:
Moving costs: Hiring movers can cost up to $10,000 or more, but DIY-ing your move still requires you to purchase packing equipment and transportation, not to mention the time and the physical work involved.
Home purchase costs: To purchase your new home, you may have realtor fees up to 6% in commission, along with closing costs to obtain a new mortgage, inspection fees and other upfront costs. You’ll also have to spend the time associated with searching for a new place.
Repairs and inspections: To sell your current home, you may have to perform minor (or even major) repairs. The home will also have to be inspected. These costs can reach as high as $6,500.
Professionals: A quality remodel may require professionals like architects, contractors, plumbers and electricians. Your city or homeowners’ association may also require you to submit architectural plans for review. Remember to budget for unexpected costs that could pop up.
Permits: Your city will likely require permits for major structural changes (but not minor cosmetic fixes). Adding square footage, updating plumbing or electrical fixtures or changing certain exterior features will likely require permit approval.
Additional Costs: Renovations frequently require offsite storage. If you’re updating necessary spaces, like your kitchen or main bathroom, you may have to live in a hotel for a time.
Financing: How will you pay for the remodel? Options include mortgage refinancing, home equity loans or home equity lines of credit, or a home equity agreement.
The nature of your local real estate market can impact whether you should sell or renovate. While home prices have skyrocketed nationally in recent years, the Federal Reserve has recently raised interest rates. The real estate market is still quite favorable to sellers, but that just means that you could struggle as a buyer on the back end.
You might compare your home’s value to comparable sales in your neighborhood. Speaking with a realtor may also help. Research your desired neighborhood as well, and make sure you avoid overpriced homes.
Besides money, there’s also an emotional value to your home. It takes time to establish yourself within a community; the longer you’ve lived in one place, the more ingrained you may become.
WATCH: Should You Move Or Renovate Your House?
Factors to consider include:
Commute: If you have a short commute, moving could add time to your work day. Or, if you work from home, consider whether moving or remodeling would help create your desired space.
Family: Your home may be a special place to your immediate and extended family. Consider whether moving would affect your role in your family.
Kids: Changing school districts is hard at any age. If you like the schools where you’re at, are the potential new ones in a good district? Do you think your kids can adjust well to the new environment?
When renovating is the best move for you, the next thing to do is to secure financing. Banks and credit unions offer home loans, home equity loans and home equity lines of credit, but these come with interest and sometimes closing costs. With recent hikes in interest rates, carefully weigh taking on a new loan.
Instead, consider financing your renovations with a home equity agreement (HEA) from Unlock Technologies. Our home equity specialists will help determine how much money you can qualify for. With a HEA, there are never any installment payments or interest fees.
Contact us today to get started.
The blog articles published by Unlock Technologies are available for informational purposes only and not considered legal or financial advice on any subject matter. The blogs should not be used as a substitute for legal or financial advice from a licensed attorney or finance professional. Links in our blogs to third-party websites are provided as a convenience and for informational purposes only; they do not constitute an endorsement of any products, services, or opinions of the corporation, organization, or individual. Unlock Technologies bears no responsibility for the accuracy, legality, or content of the external site or for that of subsequent links.