I can’t tell you how many people I’ve spoken to in recent months who have asked me exactly this question: Is it better to remodel or buy a new house? And the answer, unfortunately, is not simple but can be determined based on what is important to you and what you choose to relinquish.
Here are a few factors to consider when making a decision that will inevitably affect your life, as you choose to either move or prepare for a large remodel:
- Current equity
- With the current real estate market and the gentrification that is happening in and around Nashville, it is very common to hear that people would not be able to afford the house they’re in, in the location they’re in, had they not bought 3 or 5 or 12 years ago. This can be a tough pill to swallow, as you have to choose between changing the area you live in or paying astronomically more money to stay in the same general vicinity.
- Timeline of need
- This item has to do with what the ‘pain’ is and if there is a specific timeline on that situation. For example, if you’re expecting a baby and have no extra bedrooms, the timeline of that need is obvious. Additionally, if you are hosting a graduation party in the winter and need a new kitchen and guest suite, that timeline will be important as you consider the market between now and the ‘event’ or the timeline of the renovation. Sometimes there is no specific timeline, and you just know that you need to make a change by either selling or renovating.
- Current market
- Let’s cut right to it: the real estate market is difficult right now. It’s not that there are no deals, but you do have to work for them. It’s been wild seeing how buyers think it’s 2008, sellers think it’s 2020, and trying to have a realistic conversation about a property is difficult. The obvious way to avoid it is to stay in your current space and make it work for you, but as with all things, sometimes the easy answer is not the right answer.
- Life during a renovation
- Many people would be willing to live through a renovation where you have to cook on a hot plate and use a crock pot for months on end, and many of us wouldn’t. Some people wouldn’t be willing to disrupt their children’s lives to accommodate a new bathroom. Some people would prefer to move out during a large scale renovation rather than accommodate the mess and contractors in their home. Either way, all of these options have costs, impacts and plus sides. Be sure to include them when considering what is right for your family.
- Long term impacts of your decision
- This point is the one that no one wants to talk about, right? But if you want to do an analysis of the full picture, then the long-term implications need to be a part of the conversation. Items to consider are the interest rate of your current mortgage versus a new mortgage, and the costs associated over the life of the loan. It would be very common to have a long-term impact of hundreds of thousands of dollars due to buying a new house and starting over on a new loan, in addition to the purchase price. The timeline of your loan will likely start over as well, thereby delaying the payoff.
There you have it – items that I would consider if I were considering a new house versus renovating my current home. Unfortunately, sometimes the right financial choice is not the best overall choice for your family, and sometimes the right choice for your family does make the most sense financially. It will be different for every single family in every single household, and there is no perfectly right answer.
