Does the current housing market climate have you rethinking buying a new house?
The latest housing trends show that real estate is still a hot commodity. Homebuyers are paying for homes as investors create high demand for properties. The shortage of homes has left homeowners debating the best option between remodeling your home vs. buying a new home.
In 2018, 76 percent of Americans stated they would choose to renovate their current home over purchasing a new one. With escalating home prices, many Americans today say they can’t afford to buy a new home.
Buying a home vs. remodeling is a question that is being debated across America. Each homeowner must weigh the pros and cons to decide which option is best for their current financial situation.
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There are many considerations when it comes to homeownership. Many things go into your monthly mortgage payment. Keep reading for a guide on what to consider when deciding whether to stay or sell.
Remodeling Your Home vs. Buying a New Home: Which Is Better?
Deciding whether to buy a new house or invest in home renovations is a discussion many homeowners have today. The rise in home prices makes it difficult for people to buy their first home.
Not only are they being priced out of the market, but they are also dealing with depleted inventories. Two factors are driving this situation.
One is real estate investors creating bidding wars with potential buyers. The other is existing homeowners choosing to stay put.
Throughout time, the housing market depended on homeowners upgrading to bigger and better homes. There was also the option of relocating to new communities. The process, in turn, created housing inventory for individuals purchasing their first home.
As homeowners are forced to address what’s best for them in the current climate, they need to weigh their options. Here are a few questions to consider.
1. Will buying a new house create a financial hardship?
2. Do you love your existing home?
3. Do you have room to expand?
4. Are you near good schools?
5. Are you close to the amenities you need?
A major renovation is worth exploring if you answered yes to at least three of these questions. Take some time to create a pros and cons list. If the pros of keeping your existing home outweigh buying a new home, consider renovating.
Choosing Your Renovation Projects
Once you’ve decided to invest in remodeling your existing home, it’s time to decide on renovation projects. The most popular home renovations projects are the common areas. They are the living room and kitchen.
Bathrooms are also popular as well as outdoor living spaces.
When deciding on the projects to undertake, think about your family’s needs. Is your family growing, or are you an empty nester? If you were thinking about downsizing, you want to make use of additional space.
Do you need a home office? Turning a small bedroom into an office is a great idea.
Many homebuyers dream of having swimming pools but might not have a backyard big enough backyard. Home renovations can include adding to your existing house or tearing down portions for a larger outdoor space.
Improving Your Home’s Curb Appeal
Neighborhoods across the country are experiencing gentrification. Some homeowners sell their properties because increased home values mean higher taxes and insurance.
No one wants their home to become the ugly duckling of the block. If you’re in a neighborhood that has changed over the years, you may consider updating your home’s curb appeal.
Relacing windows and doors not only improves energy efficiency but also makes your home look newer. Explore new siding to match the look of newer homes. Find out which color palettes are trending and give your home a quick makeover.
Spruce up your home’s lawn by removing or trimming oversized trees. Put in some new sod and add stones and modern lighting fixtures.
Financing Home Renovations
Once you have a good idea of the home renovations you want to invest in, it’s time to explore financing options.
One of the biggest benefits of owning a home is with each monthly payment, you’re accruing equity in the home. You can complete a home equity loan or take out a second mortgage when you want to make major repairs or do some remodeling.
Check your credit before applying for a home equity loan. Your interest rate is still based upon your credit history and ability to repay the loan. Avoid refinancing your home at a higher interest rate or a longer repayment period.
For projects that require a lot of money, consider borrowing against your 401K, or other retirement plans. This option is good for homeowners whose retirement isn’t in the near future.
Another option is to research home improvement grants in your area. Grants are essentially free money given to homeowners to improve their primary residence. They come with a list of requirements, and the grants are often forgiven after a set period.
Your local government often backs grants. The Housing and Urban Development branch of the federal government also offers grants to homeowners.
How do You Keep Costs Down When Renovating a House?
Set realistic goals. Since you’re staying in your home to avoid the rising costs of new homes, you mustn’t overspend on your home renovations. Understand that you have time and can pace yourself.
Try doing one project at a time. Too many jobs occurring at once is confusing and can become complicated.
Hiring a General Contractor
General contractors are a good investment, and having one helps cut down on costs and time. The GC has many contacts and knows the best subcontractors in the area. They can choose people who do great work that fits your budget.
The GC can also help you save money on materials. They know how to measure jobs and calculate overages. Oftentimes they receive quantity discounts with suppliers and home improvement stores.
Permitting is a big part of home renovations. A GC knows which jobs require permits and licensed contractors. They have contacts at the permitting office and can navigate the permit process.
Being Your Own Contractor
It’s possible to act as the contractor on your renovation projects. It isn’t recommended if you don’t have building experience. It’s also a bad idea if you’re employed and can’t oversee the work being done.
You’ll also have to navigate finding the best subcontractors for framing, HVAC, plumbing, electrical, and other jobs. After interviewing candidates, you’ll need to verify references and ensure they are licensed and insured.
Pulling permits is a tedious task that can take hours. If there are any mistakes or miscalculations with the paperwork, you must start again.
Being your own GC is a noble idea, and it will save you money. However, it can delay the project and lead to unnecessary stress in the long run.
What’s the Most Difficult Part of a House Remodel?
If anything can go wrong with a home improvement project, chances are it will. Mishaps are something you can’t avoid. How you deal with them will determine the outcome of your home renovations.
The most difficult part of a house remodel is setbacks and delays. Setbacks are the things that happen when you start tearing out walls and ripping up floors. Get the original plans for your home. It will be a great asset.
Also, check with the permitting office for any major upgrades to the home’s structure before your purchase.
It can be very intrusive if you’re expanding a room, replacing plumbing, or your HVAC system. Not to mention messy. Take the most complicated home improvement project and tackle it first.
You don’t want to have a small project ruined because a wall must get cut or flooring removed. Do the big projects first because they can change the direction you take of future remodeling ideas.
What Is the Best Room in the House to Renovate?
The room in your home that will give the best resale value is the kitchen. People love nice modern kitchens with the latest appliances. A new kitchen with the right layout and decor can have you falling in love with your home again.
If you have a closed kitchen, consider an open floor concept where you remove walls to combine the kitchen, dining, and living room. It will make your home appear larger and more welcoming.
It’s also important to note that kitchen remodels are the most expensive projects.
Which Home Improvements May Not Pay Off?
When embarking on the remodeling journey, homeowners should always consider the best ROI home improvements. Increasing your resale value is essential to the conversation about remodeling vs. buying a new home.
Although you plan to stay in your existing home, you may still want to sell your home in the future. You can make several home improvements that will not pay off when it’s time to sell.
Keep in mind your location and surrounding homes play a part in your resale value. Some improvements are essential in some areas but not in others. When reviewing this list, remember that losing a bedroom to expand a kitchen isn’t beneficial to a growing family.
- Pool additions
- Luxury bathrooms
- Patio or sunroom
- Special interest rooms
- Replacing the flooring
- Building a deck
- Converting a garage
Don’t let the list dissuade you from making any of these home improvements. Just keep future buyers in mind and what comparable homes are offering.
Now let’s weigh in on the pros of buying a new home.
Financing a New Home
Financing a new home will probably mean qualifying for a larger mortgage. You’ll face the same conditions and requirements as you did when you first purchased your home.
Do you have a good relationship with your current lender? Are your payments made on time? Have you entered into foreclosure or filed for bankruptcy in the past three years?
It’s always best to have a good relationship with a lender. You also want to receive the best interest rates for a new home purchase.
Increased Costs
Keep in mind that buying a new home can come with increased costs. As home prices soar, so have property taxes and homeowner’s insurance costs.
You may also face other assessments if you move into a planned community.
Figure in other incidental costs when calculating the cost of buying a home vs. remodeling. You can incur new expenses or increase your existing cost of living if you move away from your work location or kids’ schools.
- HOA fees
- Cost of gas
- Toll fees
- Local taxes
- Higher utility costs
Create a mock budget based on three homes you’d consider buying today to see if there is a significant increase. If not, and moving is a serious consideration, now might be the best time to buy a new home.
Relocation
Perhaps you received a new job, and it’s more than 30 miles from your home. Driving in an area with poor transportation can become stressful. Plus, gas and car repair costs are unpredictable with rising inflation.
Moving closer to work may be a better option.
Long-Term Goals
Always consider your long-term goals when it’s time to buy a house. Putting 10s of thousands of dollars into a home renovation may not be a sound financial decision if your future plans evolve around downsizing or retirement.
Investing your savings in home remodeling projects could jeopardize your future.
Will You Stay or Will You Go?
If you’re like many people across the country debating which is the better option, remodeling your home vs. buying a new home, you’re not alone. Consider holding on to your existing home for a few more years. The right improvements can pay off in your home’s resale value.
Whether you’re staying put on the move, you’ll need home or property protection. Choose an insurance agency that works hard for its customers. Click here to receive a home, auto, or business insurance quote.
