Very few people are able to purchase their dream home the first time they enter the housing market. Instead, it’s common to buy something that will work for the next two, five or ten years (or even longer) with plans to upgrade when the time is right. This might be when your family grows out of their current space, or when your budget allows for something bigger or in a different location. Or, it could be that your home isn’t functioning as well as you’d expected, necessitating some sort of move or renovation.
If your current home is no longer working for you, it can be hard to know whether to call a contractor or a real estate agent. Here are a few things to consider if you’re deciding whether to renovate your home or move on to something new.
Start by assessing your budget
Moving to a new home can be a big expense, but so is renovating — particularly if you have large scale plans. Before deciding which path to take, price out both options in detail in order to have a complete picture of the situation. This means speaking to a contractor about your potential renovation as well as looking at real estate listings that meet your criteria. Remember, a list price is different from a sale price, which may be substantially higher if a bidding war was involved. A realtor can help you have realistic expectations.
When pricing out a potential move, be sure to consider closing costs and other fees as well as the price of the house. Consider the impact to your monthly budget (for example, higher mortgage payments and/or property taxes, more money spent on gas due to a longer daily commute).
A renovation can be done all at once or one room at a time, which offers some flexibility. You may also want to assess the equity in your home and determine what funds would be used to pay for a renovation, should you go that route. Very few families can pay for a major renovation out of pocket, so it’s important to understand your borrowing options. A HELOC is a lot more cost effective than a personal loan, for example, and this difference should factor into your decision-making.
We aren’t suggesting that the less expensive option is inherently the right option for your family — rather, we’re recommending that you do your research and make an informed decision.
Think about your long-term goals
The decision to renovate your home or move to a new property should reflect your current needs and your long-term goals. The specifics of your wishlist also play a role. For example, are you in a neighbourhood you absolutely love? That may sway you towards renovating instead of moving, as the pool of available properties in any given area is limited. Alternatively, is the home too dated for your taste, which is fixable, or way too small, which is more challenging? Would a renovation significantly improve your quality of life, or are your issues best addressed by moving? Picture the future you want for yourself and your family and decide how you can get there without breaking the bank.
Consider putting your plans on pause
Throughout the COVID-19 pandemic, it’s been difficult to get building and renovation supplies such as lumber, metals, windows and other materials. This has dramatically increased wait times and prices in many regions, making renovations more complicated than in previous years. The ultra-competitive real estate market has also presented challenges for buyers in many regions. Knowing this, it may be best to put your plans on hold until things settle down somewhat. We can’t promise that the real estate market will improve for buyers, but access to renovation materials should normalize over time.
Big choices benefit from solid advice. To discuss your financial situation with a dedicated financial advisor from Interior Savings, please contact us. We’d be pleased to hear from you and arrange a meeting.