IS IT CHEAPER TO REMODEL MY HOME OR MOVE TO A NEW HOME?
A lot of factors can affect a decision of whether to remodel your home or buy a new (or already-renovated) home. What is the most cost-effective option to upgrade your house? How difficult is it to get a home equity line of credit? How difficult will it be to sell my house? Can I afford a new house?
The thought of moving into a new house may seem overwhelming, but in most cases, moving into a new house is easier and more cost-effective than remodeling your home. There are several different reasons for this, the biggest being that mortgage loans tend to be easier to qualify for and are usually at a lower, fixed rate than home equity lines of credit.
Home equity lines of credit tend to be higher and at a variable rate, similar to a credit card. So, unless you have a substantial cash savings to pull from, a major renovation or remodeling home project (such as a bathroom or kitchen) may not be a great option for you. In these instances, buying a new home that already has the upgrades you are looking for is probably smarter.
To find out what types of loans and interest rates that you may qualify for, it’s best to contact your local lender or credit union. They’ll be able to help you understand your loan options, and what you may qualify for, including home equity lines of credit, should you choose to go that route.
For those who have enough cash savings to cover remodeling costs, it’s best to compare the out of pocket costs verses potential home value increase. To do this, answer the following questions as accurately as possible:
(scroll below for 3 questions to ask before you renovate)
- How much money will my renovation cost? This includes contractor time, labor, and materials. It’s best to get estimates from at least two or three contractors who are licensed and bonded, and who have a good reputation in the community. Be sure to tell the contractor exactly what type of materials you’d like to use in your renovation (i.e. quartz counters vs. granite counters, type of wood and style of cabinetry, carpeting vs. laminate vs. wood floors, etc.) so they can estimate material costs more accurately.
- How much value will this renovation add to my home? The best way to find out the potential added value now verses after remodeling is to consult an experienced real estate expertwho is familiar with your area or neighborhood. A Realtor can help you find out what your current home value is, and what your home may be worth after the renovations have been completed.
- Given this information, is remodeling my home the best investment of my cash? If the renovation cost is higher than the potential increase in home value, then it’s probably better to move than to remodel. If, on the other hand, the renovation will add a significant amount of value to your house that outweighs the cost of the remodel, then it’s probably better to renovate.
Have more questions? Contact us! We’re always happy to help you fully understand your options.