June 14, 2018
June 14, 2018
This is a question that most homeowners face sooner or later. Is it better to renovate or buy a new home? There are advantages in either direction. It’s mostly about focusing on the benefits that most apply to you and your situation.
Let’s take a look at both renovating your existing home, and buying a new home, and see which might work better for you.
A house is never just a “thing,” or just the place where you live. It’s that corner of the globe where you move in, create a life, and put down roots. That process involves a very healthy dose of continuity. The longer you live in your home, the more apparent these outcomes are. It’s never easy to simply pick up and move to a new home.
If that describes you, renovating your home may be the better strategy. In fact, it’s a way of getting the best of both worlds: you get a “new home”, while staying in the same one. It’s an opportunity to create a better home than the one you live in now, without the need to move to something totally different.
There are probably certain things about your home that you don’t like, and others that you do. Renovating gives you an opportunity to improve on the things that you don’t like. For example, if you generally love your home and neighborhood, but you don’t like the kitchen, renovating it can give you the home of your dreams.
Unless you are building a new home – as in a custom built-home – there will always be parts of the house that you don’t like. But when you renovate, you can change that. You can make a series of changes to the home that will fit perfectly with what you want. You can also take as much time as you like, that way the renovations can fit neatly within your budget.
Some people get tremendous personal and emotional satisfaction from doing DIY work. Not only is it a creative venture, but it also provides a sense of accomplishment. A renovated home is a virtual museum of the owner’s DIY efforts. It’s a source of emotional comfort, pride, and even bragging rights with company and visitors.
It’s possible to raise the value of your home by an amount that exceeds the cost of the renovations. For example, you might make renovations that cost $25,000, but add $50,000 to the value of your home. That creates instant additional equity.
Naturally, this isn’t easy to do. Some improvements add more value than others. Some even cost more than they add in value. The secret is to isolate those improvements that provide the greatest boost in value, at the lowest cost.
If you can, not only will you improve your home, but you will also raise your net worth. That’s a win-win of the best kind!
It’s possible that no matter how extensively you renovate your current home, it will never be your dream home. That may be possible if the home is simply too small, or if you don’t like the location. When you buy a new home, you have a chance to purchase your dream home – or at least one that’s closer to your ideal home.
One of the biggest disadvantages with renovations is the fact that they can be extremely disruptive. It can take weeks or even months to renovate a single room, particularly if it’s DIY, and you’re doing it in limited spare time. For example, if you are renovating your kitchen completely, you may lose use of the room for several weeks until it is completed.
When you buy a new home, there’s only the brief disruption that occurs during the move itself. Usually, that takes no more than a week or so to complete. That’s a lot better than the several weeks that you will spend on each and every renovation project in your current home.
Anytime you renovate your home, you run the risk of over-improving it. Earlier, we looked at the example of $25,000 in renovations increasing the value of your home by $50,000.
But it’s also possible that it will go in the other direction. You may spend $50,000 in renovations that will only increase the value of your home by $25,000.
That may even be a more likely outcome, since most people renovate their homes for their own use, and not for resale purposes.
Unless you’re able to pay for renovations out of savings, you’ll need to get some type of financing to cover the costs. That may require the use of a home equity loan, a home equity line of credit (HELOC), or even increased credit card balances. It means that you will have at least two loans related to your home – your current first mortgage, plus the additional source of financing.
When you purchase a new home, you’re generally able to do that with a single new first mortgage. That means that you have one loan, and one monthly payment. Not only is it simpler than juggling two or more loans, but it’s often easier on your budget as well.
If you’re not going the DIY route, you’ll have to rely on contractors to complete the renovations. If the contractors are good and honest, this is an ideal situation. But if they aren’t, it can be a certified nightmare.
You could be looking at cost overruns, completion delays, and work not completed according to your specifications. That will take all the fun out of renovating your home, and could even sour you on the whole process.
Objectively, neither renovating nor buying a new home is categorically better than the other. It’s really a matter of personal preference – how much do you like your current home, how far do you want to go with renovations, or how much do you simply want to move on to a new home?
Answer these questions, and you’ll know which strategy is best for you.
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