Many of us face this challenge in life. For some reason or other, we need to either take on home remodeling or improvement projects. So is it always better to improve your current home than trying to move a to a newer and bigger home?
It is becoming more and more common for people to go down the avenue of improving their current home rather than moving. Often, people find themselves in this quandary, trying to decide which makes more sense for their situation, do they stay in their current home, after home improvement, or up the route and move to a different property.
There is two most common reason behind the need to move is – one, family outgrowing the home size and, two, a change in the workplace. of course, you have to move in order to meet the new job need. So, in this article, we will talk about a need to move to a newer and bigger house as opposed to taking up home improvement option.
Although some people want a move to a new home, many are finding that under certain circumstances, it’s more economical to stay put and develop their current home to fit their needs.
Like everything else in personal finance, this is also a very personal decision. There are lots of variable factors we are talking here. Variables like,
- Nature of home improvement needed
- Your savings
- Your budget
- Amount of free time
- Availability of local contractors
- Price of your current property
- Price of other fitting properties, and lastly
- Your credit score
These factors are different for each individual. So, moving or home improving is not a two-minute decision to make. You need to spend sufficient amount of time, for fact-finding and data gathering, before deciding what to do. Move to a new home or remodel your current home?
You need to figure out what it is you want from your home and whether or not this is achievable within your present property area, and for a charge that suits your budget. Do you just want to give your home a makeover or were you looking to generate additional space?
Nature of home improvement
Creating space can be achievable in many situations with a small budget by converting and existing garage or attic. Smaller projects that don’t alter the exterior of the property don’t require planning permission which means this kind of renovations can be completed over a short space of time. It will also save you a lot of money as you aren’t doing any major building works.
What makes adding extra space a difficult job, is the extent of changes on the outside. Any change to the building exterior would need a lot of permissions and approvals and cost can be high.
This determines how much you’ll have to borrow to cover the remodeling cost. If you don’t much savings then you need to borrow more money. Also if you want to move and the difference between your selling price and buying price is significant, then also your savings plays a big part in determining the extent of additional mortgage you’ll have to take on.
depending on your budget, you may or may not want to go for remodeling and opt for a home swap instead if the cost of home improvement is too high for your budget.
Amount of free time
This is most neglected, but very valid aspect of your decision making. If you’re out of time you’ll most likely compromise. You’ll compromise on the quality of repair work. You may even find yourself not having enough time to look out for new homes to move to. A small repair work, which anyone else in your home can oversee, can be the best fit in this situation.
Availability of repairmen
This happened to one of our family friends. After the detailed design of the planned remodeling, they found their builder out of business. This may not happen with you, but these are a possibility. Also, you may want to find an affordable company to carry out your home improvement work.
Price of your current property
Very important to remember that, if the property values in your area are not very high, any amount of home improvement can’t increase your home value by the amount of your spending. If you spend $50,000 on your home improvement, the property value might not even increase by $20,000. So keep an open eye to this aspect as well.
Price of the target property
If you get a cheaper and bigger home, fitting all your needs, I don’t see any reason you shouldn’t be moving. Still, some deciding factors could be the school district, distance from work, crime record and neighborhood, etc.
But with almost equal conditions in your current home and target home, if the target home is available at a cheaper price than your current home selling price, then one should decide to move.
Please do consider the cost of home sell and cost of home buying into the equation as well. A buyer has to pay for title, registration, taxes and the seller has to bear the brokerage charges for realtors.
Credit score and credit report will determine the rate of interest on your loan. Whether it is a home equity loan, a personal loan or a new mortgage, a better credit score will lower your APR rate, and vice-versa.
Other smaller deciding factor could be the level of difficulty your family will have to face during the repair work.
When home improvement work takes place there shouldn’t be too much disruption to your current living spaces. The work should be less interfering and as quick as possible. You also need to think about building permit and getting approvals from local authorities, if the changes are needed to the outside of your home.
If by above selection process, you decide to rather stay put and improve your current home, you may start thinking about financing the project. There are ways to finance home improvement costs. If you don’t have the savings to achieve these then secured loan option, like home equity loan may be more suitable for larger projects.
whereas an unsecured loan, like personal loans (here are best personal loan options in the US) may be suitable for the smaller projects. Ensure you speak to a qualified financial advisor before going ahead with any lending.
About the Author: Ceri Harris is an underwriter at Willows Finance a secured loans company based in Wales.