Pros & Cons: Renovating vs Buying a New Home
Is it better to renovate a home or buy a new one?
Guest Post by Andrea Davis
After living in your home for a long time, you might decide it’s time to make a move. But if you don’t exactly have the budget for a new home, it might serve you better to remodel your existing home. How do you determine which is the better decision? Here are some considerations to help you make the big choice.
Questions to Ask Yourself
- Is staying in your location really important? If you like the neighborhood you’re living in, you have the choice to renovate your home or buy a home in the same neighborhood.
- Do you have the budget? In locations with affordable homes, you might lean towards buying new. In cities with expensive homes, it might be cheaper to renovate.
- Can you renovate your home without changing the floor plan? It costs less to renovate your home — almost 50 percent less — when you don’t change the structural elements.
- Will renovations increase your home’s value? Some remodels and changes increase a home’s value, while others are just money down the drain depending on your local market. You should always consult with a remodeling expert before you embark on big projects to see if they’ll add value.
- What’s your long-term plan for the home? You shouldn’t make renovations to a home if you don’t have a long-term goal for it. For example, if you live in a two-bedroom house and plan to have a lot of kids, you’ll likely need to move sooner than later. Sometimes it’s just easier to move into a new home.
- How does moving affect property taxes? Property taxes vary by county, and moving into a new home might mean an increase. Check with a real estate agent and the city itself before to make sure you wouldn’t be paying more taxes as a result of moving.
- How is your mortgage affected by a move? Buying a new home could mean a lower mortgage, depending on market conditions. You could also end up with the same mortgage — you’ll need to see what real estate pros say and what your best deal could be.
Weighing the Pros and Cons
Once you’ve answered some of these questions, you might be leaning more towards one decision than the other. If you need more information on renovation versus buying a new home, here are some of the pros and cons of both decisions.
Relocating
Selling your old place before searching for a new place can be a long, extensive process with an exciting result. And it can be both stressful and arduous if you don’t approach it correctly. Here are some of the advantages and disadvantages to weigh in the process:
Advantages
- New beginnings: You get to start over in a new place — whether it’s down the street or in a new neighborhood, city or state — beginning again with your family and belongings. You get to meet new people, decorate your new home and settle into a new landscape.
- Financing options: Once you’ve bought a house the first time, it’s easier the second or third time around to go through the paperwork and purchase process. Your agent will help with title, insurance, taxes and finding a quality lender to help you buy the house.
- Income taxes: Depending on your state laws, selling your old home could land you extra money in your pocket without added taxes because of the capital gains exemption (which is up to $250,000 and $500,000 for married taxpayers). There also are eco-related tax credits available if your new home qualifies. You should check with your real estate agent and tax filer.
- High costs: Selling a home involves paying your real estate agent and other fees throughout the process. It’s long, complicated and expensive, and you have to be willing to go through it to acquire your new place.
- Moving: Moving can be a problematic process because you always find stuff in your old place that you never used. That leads to sorting, throwing away and trying to pack everything within a short timeframe. It’s added stress that can be overwhelming at times.
Disadvantages
- High costs: Selling a home involves paying your real estate agent and other fees throughout the process. It’s long, complicated and expensive, and you have to be willing to go through it to acquire your new place.
- Moving: Moving can be a problematic process because you always find stuff in your old place that you never used. That leads to sorting, throwing away and trying to pack everything within a short timeframe. It’s added stress that can be overwhelming at times.
Remodeling
While your current home may seem drab at times, remodeling the space allows you create new spaces, update its function to meet your needs and create an ideal home, depending on your budget. However, it comes with a lot of disadvantages that may or may not be worth the investment.
Advantages
- Costs less: The cost to remodel your home is less than buying a new home because it’s on a room-by-room basis. You don’t have to remodel everything in your home, which means your budget can flow with what you need to do. Moreover, there are ways to save money on your renovations so that you get a great end product without spending a fortune.
- Personal touch: Renovating allows you to change your existing home to meet your personal expectations and desires, as compared to buying a new home that may have a few features you want but not at all. Why spend hundreds of thousands on a new house and update it when you can keep your old home and update it a little at a time?
Disadvantages
- Not for major overhauls: If your home needs a complete do-over, then a remodel isn’t for you. It’s not worth the investment to spend thousands of dollars to change every single room in your home when you could buy a new house with all of the updates. It’s better to renovate a few rooms in your house rather than all of them. It’s also not worth it to remodel your house if you’re trying to downsize.
- Financing issues: Remodeling requires a homeowner loan, family loan, payments to contractor or vendor loans. You must have home equity, so if you haven’t lived in your home for a long time, it could be hard to get approved.
- Construction: Remodeling means your home will be in shambles for days to weeks as the room is updated. You can choose to stay in a hotel — which means spending a few extra dollars — or stay in your home. It’s a bit stressful and loud — and it requires patience, which not every homeowner has.
Conclusion
What’s the best decision for you as a homeowner? Is it time to make the move into a new home, or is yours just in a need of a few fixes? Whichever you choose, get the finances, paperwork and appropriate professionals lined up before your proceed.