At some point as a homeowner you’re going to come to an inevitable, emotional and mathematical fork in the road. Whether your starter home isn’t enough for your growing family, you’ve recently become an empty nester or you just really want an updated kitchen or floor plan, you’ll likely ask yourself whether it’s in your best interests to remodel or renovate or list and trade up.
Making the decision to invest in your home or list and buy again is a huge financial and personal decision that shouldn’t be taken lightly. Ask yourself these questions to help work through the process.
What Do You Like/Dislike About Your Current Home?
Begin a pros and cons list to start with. From the amount of bedrooms and bathrooms to street traffic noise and natural light, leave nothing untouched on this list, you’ll be using it later.
What Will It Cost to Make Your House Better?
You can’t make your lot size bigger or change your school district zoning. Certain things about your home just can’t be adjusted. Look at your list of cons and determine which projects you would prioritize to make your home meet your family’s needs.
Then, price it out. What is the going rate for basement finishing in your area? A kitchen remodel? A garage and master suite addition? Cost and value are going to be big factors in your decision to stay or go.
If you’re thinking of an addition, you’ll also want to check in with your city’s building laws and planning and zoning restrictions. Cities often require a permit request for exterior structures, and they may have certain restraints on how close you can build toward your property line.
How Do You Feel About Your Neighborhood?
Now let’s address the sentimental side of your decision. A great neighborhood is something you can’t put a price tag on, so if you like your location, your neighbors, the school district, etc., you may not want to face the possibility of having to look for a home elsewhere.
What’s Your Time Frame Look Like?
If you make major renovations, are you planning to stick around for a while? Though home renovations are smart when they’ll increase your home value, you also want to think about how long those renovations would keep your home “livable” for your family. Is it a short-term fix or will this renovation make your home your forever home?
Certain factors may also make listing and buying again a more attractive option. For instance a household with small children at home may not want to live through the process of renovating common family areas like kitchens, living rooms, etc.
What’s the Market Doing?
Low existing home inventory, heavy homebuyer traffic and low mortgage rates have made the sellers’ side of the market extremely profitable. In August 2016, home valuations were up 6 percent year-over-year, according to the Home Price Index. This puts both home sellers and homeowners in advantageous positions to either sell and buy again or tap into built home equity for renovations.
What’s Your Budget?
Just like when you bought your home, now would be a good time to consult with both your mortgage banker, as well as your real estate agent. Your mortgage banker can review your finances and your current mortgage for your options and affordability on a cash-out refinance, a renovation mortgage or a whole new mortgage for a different home.
Speaking with your real estate agent is a smart move, too. Even though home renovations should be for your own enjoyment, it’s wise to make sure they will be assets to your home’s value. A real estate agent can help you determine your remodel vs. upgrade debate by showing you comparable homes with similar completed renovations and their values, as well as the price of purchasing a different home with those features. See some of the best home renovations for cost recoupment here.
Looking for more information about home renovation loans, your refinancing options or upsizing/downsizing? Download one of our free guides to walk you through the process.