It’s not easy to decide whether you should remodel your home or if it makes more sense to move. But if you’re asking the question, chances are you’re leaning towards making some kind of change. Maybe your home no longer fits your family’s needs, or perhaps it’s showing signs of a much needed upgrade. A home renovation might fix the problem, but so could putting your house up for sale and just finding a brand new one.
Either option will affect your wallet. But you’ll want to make the choice that’s right for you and your loved ones. Here are some tips to help you decide.
List out your remodel goals
Start by making a list of upgrades you’d be willing to pay for, either in your current home or a new one. For example, if you bought a home built in a different era it may have some outdated cosmetics. This could lead to an updated bathroom or kitchen. You’ll eventually use this list to estimate how much it would cost for a home remodel, and that can help you decide if it makes more financial sense to upgrade or sell. Some homes can be brought back to life with just a few projects, not necessarily changing the entire home.
Learn your local market
There are a few ways to get the answer to that question. One is to compare your home’s value with recent sales in your neighborhood. If neighboring homes are worth more than your house, a remodel could bring the value of your property in line with others in your neighborhood.
But if you already own a high value home, you probably won’t get a quick return on your money if you pay for a major remodel. This might not seem like an issue if you plan to live in your home for several years after paying for a renovation. But if you need to move sooner than expected, your home might not sell for enough to make back the money you put into the project.
Also be aware if you’re part of a homeowners association, ask a board member to provide neighborhood home-improvement guidelines. If you need more space but have restrictions on adding square footage to your home, then selling and buying a bigger home will probably be the better choice.
Estimate home renovation costs
If you’re leaning toward a remodel, contact a local contractor for a detailed estimate.
Along with figuring the costs, you’ll also need to decide how to pay for a renovation. Homeowners often fund home-improvement projects with a mortgage refinance, a home equity line of credit or personal savings. If you have more than 20% equity in your home, you may be able to take some of the money out and use it to pay for a renovation as well.
Compare cost of selling your home
If you sell your home, you might not have to pay for major renovations, but you’ll still have expenses. Full-service real estate agents usually charge a commission of about 6% of the purchase price. There also are moving expenses and travel costs to search for homes in different areas, which can add up quickly.
Add these costs together and you can expect to pay thousands of dollars before you even move to a new home. And you’ll need to have a down payment too.
If you have equity in your home, however, you can use money from the sale to help fund your next move.