Many people face the choice of remodeling their home or buying a new one.
It's not uncommon to buy a home you think will suit your needs only to discover later that you're desperate for added space. Maybe you've expanded your family. Maybe you have aging parents who you'd like to have under your roof. Or maybe you want an extra room or two to use as a workshop for your favorite hobby or side gig.
But is building an addition on your home a good idea? Or should you pack up and move to a new home that's large enough for your needs? Answering the following questions will help you figure out whether it pays to opt for remodeling versus buying a new home.
1. How important is location?
One big drawback of moving to a larger home is having to move. Not only is packing a hassle, but in some cases, it could negatively impact other aspects of your life.
Imagine you currently live within walking distance of shops, restaurants, and transit. Moving half a mile away to a larger home might force you to hop in a car every time you want to leave the house. If that's not your preferred lifestyle, you're better off investing in your current home.
The same holds true if you have school-aged children, and moving would force you into a different district. You may not like the idea of pulling your kids out of the school they're used to. If that's the case, adding to your existing home is a smart bet.
2. How much do you value your outdoor space?
If you're looking to add onto your home, that extra square footage will have to come from somewhere -- namely, your backyard.
If you're sitting on a huge lot and won't miss the space, it could make sense to expand and stay put. But if you have a smaller yard and your family spends a lot of time outdoors, you may not want to cut out a huge chunk of land by putting more house on it. If that's the case, it could pay to buy a new house that has more indoor and outdoor space.
3. How will renovations impact your day-to-day life (and how long will they take)?
Building onto a home takes time, and it can be a fairly disruptive process. Moving, meanwhile, is also a hassle, but you can wrap it up more quickly.
Talk to different contractors to see what sort of timeframe you're potentially signing up for, and weigh that against your tolerance for living in a construction zone. If the idea of dust and noise for two or three months doesn't sit well with you, you may be better off moving.
4. Is expanding a good investment?
Any time you consider making home improvements, ask yourself whether it’s a wise investment. In some cases, building onto an existing home can be a smart financial move. If you live in an area with great schools, camps, and amenities for children, adding more square footage could prove quite rewarding when the time eventually comes to sell your home, as you’re likely to attract families. On the other hand, if you live in a neighborhood that attracts primarily older residents looking to downsize, a larger home may be tough to unload at a premium.
Keep in mind, too, that expanding your home could let you use it as a source of rental income. Even if remodeling your home doesn’t boost its sale price, you could still come out ahead financially.
Either way, before you sink money into a home addition, figure out whether you're likely to see a good return on investment. If not, you may be better off buying a larger place elsewhere.
5. How will expanding impact your ongoing homeownership costs?
Paying for a home doesn’t just mean covering the mortgage. You’ll also need to pay property taxes, homeowners insurance, and maintenance costs. And the more space you gain, the more these additional expenses are likely to rise.
Granted, buying a larger home could result in similarly increased costs, but in that case, you’ll have the option to shop around and perhaps buy a home in a town with a lower property tax rate or a newer home that requires less upkeep.
In other words, moving could prove less expensive than remodeling in the long run.
6. Are you in a good position to apply for a mortgage?
Buying a new home means applying for a mortgage all over again. And if your credit score recently took a turn for the worse, or your income dropped from its previous level, that could prove problematic.
On the other hand, if you have plenty of home equity to work with in your current place, you can tap it to pay for renovations.
Expanding your existing home gives you the benefit of more space without having to uproot your life, while moving gives you a fresh start and the chance to enjoy additional amenities you may not get if you stay put.
Ultimately, there are pros and cons to both decisions. If you’re not sure whether to remodel or move, contemplate the above questions to arrive at the most logistically and financially sound choice.