Today on Dear Claire, we talk about whether you should renovate your home, or buy another and move.
It can be a very difficult question, and to be frank, it’s very specific to you and your situation. I’m going to give you a couple of the moving parts and what I would consider. And then I’d highly recommend that you talk to your trusted professional, ideally, me, but hey, you might have someone else out there too.
If you are going to sell your house, you’re not going to get the interest rate that you probably have right now. Your payments are likely going to be higher because the interest rates are higher than they have been in the last 10 years. If you stay in your house and renovate, the problem is that you have to have a huge amount of money, or find a way to get a huge amount of money in order to execute the project. A typical kitchen renovation is going to be around $150,000, and a typical basement renovation $200,000. You can do it for less than that, but you may not be happy with what you get. Most people don’t have $150,000 lying around so either they have to borrow against their house or cash out other investments. With borrowing against your house, often in a home equity line of credit, the interest rate will be variable and there’s probably going to be a higher payment. If you cash out investments you’re losing the potential to earn money on that investment, as opposed to just buying a new property that you can get a normal loan on and just move on with your life.
There are also the miscellaneous costs of six months of renovations because pretty much everything takes six months if you want to change it in your house. For example, if your kitchen is fully remodeled you’re either setting up a hot plate in the garage or eating take out for six months. There is also just living in a remodel, which can be a nightmare, speaking from personal experience.
Ultimately it’s up to you to decide what is right for you. You’ll also need to get more details from the lender and/or realtor. Maybe look at a couple houses and decide if there are options out there before deciding to remodel.
Feel free to reach out to me because this is a conversation I have with my clients all the time. It’s not as easy as you would think to figure out. Have a wonderful week.