If you’ve been in your current home for a few years now, you’ve most likely built up some equity. You may also be finding that your home doesn’t quite meet your needs anymore. Certain areas like your kitchen or bathroom might be in need of an upgrade or your family may have grown and space is a bit tight.
So, the question that most homeowners will face at one time or another is, should you renovate your current home or sell it and buy a more suitable one. It’s a major decision and there are a lot of factors to consider. Here are some tips to help make your decision a little easier.
Step 1: Get An Appraisal
Before you even think about all the pros and cons of either option, you should get an appraisal of your current home. This will give you an idea of what it’s currently worth and what you can expect to sell it for.
Once you have a ball park figure to work with, you can compare this to what other homes in your area are selling for. Plus you’ll also have an idea of how much equity you’ve accumulated over the years of paying your mortgage.
Step 2: Get A Rough Idea Of What Renovations Would Cost
Next you need to decide what renovations you would like to make to your current home if you were to choose to stay. Do you need to add an extra bedroom? Does your bathroom need upgrading or do you want to add an en-suite? Is your kitchen is a bit outdated and too small for your current needs?
It might help to talk to an architect who can look at your current floor plan and make some suggestions as to the best way to get the maximum functionality out of it. You might be able to change the floor plan to accommodate an extra bedroom without adding an extra level.
Once you have a rough plan of the things that need to be done, you should then get a couple of quotes from experts. Bear in mind that these will only be initial quotes and the costs could blow out if your wiring or plumbing is old and needs replacing.
If your home is old, you may also have a problem with asbestos which can be quite costly to remove. Also major structural changes would be more expensive than purely cosmetic changes.
Step 3: Evaluate Whether The Renovation Costs Would Add Value To Your Home
After you have an estimated cost of the renovations, it’s time to consider whether these changes will add value to your home. Check out homes in your area which have been renovated or which offer the types of improvements that you’re keen to make.
What are these homes selling for? If you were to renovate your home and then sell it two or three years down the track, would you recoup the cost of the renovations? In a lot of situations this would not be the case. However, if you plan to stay in your current home for many years, then it might still be worth it.
Step 4: Check Out The Price Of Homes That You Can Purchase Which Will Meet Your Needs
Of course, when deciding whether to renovate or buy another home, you first need to find out how much you need to spend on a new home which will meet your needs. Once you have a rough idea of the price you’ll need to pay for your dream home, it’s time to work out the finances.
Do you have enough equity in your current home to cover the additional cost of the new home? Will you be able to transfer your mortgage or will you need to apply for a new home loan? Remember that setting up a new loan will involve various additional costs which you’ll need to factor into your calculations.
Step 5: Do Your Sums
Your next step is to work out the financial implications of each option. If you decide to renovate, there will be the renovation costs plus you need to factor in an extra sum for unexpected costs. In more cases than not, renovation costs do tend to blow out a little from the original quote.
You might also find that if you’re doing major renovations, you may need to move out for a little while so you’ll have to factor in temporary accommodation costs unless you have family or friends you can stay with.
On the other hand, if you decide to sell and then buy a new home, there are additional costs to consider. Selling your current home will add costs such as stamp duty, agent fees, advertising fees and legal fees. Plus you’ll also need to factor in the cost of moving such as removalist fees and changing over utilities.
Step 6: Consider Your Lifestyle Needs
Your decision should not however, be totally based on financial considerations. You also need to consider your lifestyle needs and what you want in the years to come.
Are you emotionally attached to your current home? Does your current neighbourhood provide everything that you really want? If so, it might be better to renovate your current home rather than move to the unknown.
On the other hand, you might like the idea of a change in scenery. Perhaps a new neighbourhood might provide more lifestyle options for you. Also consider where you work and whether moving would increase your travel time and costs.
Another thing to consider is that moving house can be extremely stressful too. Although it will give you a good excuse to declutter, you still need to pack up everything and have it moved to your new home. Then you have to unpack everything once you get there.
And finally, if you do decide to move, you’ll need to ensure that you get the timing right otherwise you might find yourself looking for temporary accommodation for a short period of time. You should also consider that if your new home settles before your current home sells, you might need to take out a bridging loan which can be quite expensive.