One of the most difficult choices you will face is deciding between buying a new home or paying for a whole remodel. Considering how much you will potentially spend on either move, you must make the right call.
Of course, making that decision is easier said than done. The right move for some may not apply to your specific situation. Furthermore, there are changing variables that you must account for as you try to decide.
To make the decision process a bit easier, we have highlighted the questions you must ask when deciding between buying a new home or paying for a remodel. The answers may reveal what your move should be.
What Are Your Long-Term Plans for Your Living Arrangements?
Let’s start with what is arguably the most important question any homeowner should ask. We do not always think long-term when making major decisions, and that is a mistake. You do not want to spend big on something only to realize later that it was the wrong move.
When it comes to your home, you should first consider what you want to do with it long-term.
Do you see yourself settling down in your current home with your family? If your home is too small, staying long-term may not be feasible. Hold off on renovations and save for a new home instead.
Then again, you may be looking at your current home as a potential investment or something you want to leave behind as an inheritance. In either case, you should think about paying for renovations.
Remodeling your home before selling it makes a lot of sense. You can add certain features during the remodeling process to make your property more appealing to potential buyers. By paying for those new features now, you can reap the benefits later.
We recommend renovations even if you are leaving your home behind to your children. Fail to renovate your home, and it could gradually fall into a state of disrepair. You do not want your kids dealing with that problem so take care of the issues ahead of time.
How Much Will the Potential Moves Cost?
Cost is inevitably going to become a major factor in what you decide to do. You may need to rule out one route entirely because it is too expensive.
Per the Motley Fool, the median home price in the United States is right around $375,000. Bear in mind that location affects home prices, so that number can change depending on where you are buying.
$375,000 is a steep price for a new home, and it may be enough to deter folks from pushing forward with their purchasing plans. That is more likely once they learn about the cost of a whole house remodel.
The high-end estimate for a complete home renovation is right around $200,000. It is possible that buying a new home will cost twice as much as remodeling your current house.
The gap in pricing is significant, and it should factor into your calculations.
Are There Additional Taxes You Should Worry About?
You cannot forget about potential taxes when deciding between purchasing a new house or paying for a whole home remodel. Being mindful of taxes is especially important because they may have long-term effects on your finances.
There are two specific taxes that you need to keep in mind, with those being the capital gains tax and the property tax.
Capital Gains Tax
The capital gains tax is an additional fee you only need to pay under certain conditions. To be more specific, it comes into play if the home you are selling has amassed a significant amount of value.
Usually, homeowners only need to worry about the capital gains tax if the value of the property they are selling increases by over $250,000. That is a high bar, so you may be able to avoid the capital gains tax.
Talk to your real estate agent if you want to be sure. Ask them about the increased value of your property and what that could mean if you decide to sell.
You should also ask about property taxes before making any firm decision. Property taxes can change significantly between states, and they can even fluctuate between counties.
Since you pay property taxes every year, you must consider their effect on your budget. The higher taxes can affect your savings and your budget for your annual expenses. It is important to recognize the impact they can have before making any decision.
Do You Have the Money to Execute Your Plans?
This is an obvious question to ask, but it is still worth highlighting. When deciding between a home remodel or a new home, you must think about how much money you currently have.
We’ve already established that buying a new home is significantly more expensive, but you can use the money from selling your house to fund that move. You should have enough money to cover the down payment, especially after adding your savings to the mix.
Financing the remodel may be tougher.
Because you are not selling your home, you will have less money to work with. Thankfully, there are ways to finance the renovations without paying all at once.
For example, some homeowners will take out a second mortgage to pay for the renovations. If you decide to renovate well ahead of time, you can also opt for re-financing. After negotiating a lower rate for your mortgage, you may be able to save money faster for the whole house remodel.
No matter which path you choose, you make sure that you have the money required to see it to completion.
Is Remodeling Your Home Worth the Trouble?
Let’s assume for the moment that you want to remodel your home. You now have a clear idea of what you want to do so you can start mapping out your plans. While doing so, you may find yourself constantly running into stumbling blocks.
Those stumbling blocks may include:
- Significant damage to your property
- Neighbors who do not want to be disturbed by the construction work
- Disputes with the homeowner’s association in your area
- Issues with local ordinances
Dealing with all those problems along with the renovation project can be exhausting. You may also find yourself saddled with fines and other legal fees if you make some crucial mistakes.
You can learn more about all those potential issues by discussing the project with a general contractor first. Seek their advice before proceeding with your plans.
Is Now a Good Time to Enter the Real Estate Market?
You’ve probably heard of the popular saying indicating that the three most important things in real estate are “location, location, and location”. It is the kind of line that sticks with you and there is a lot of truth to it as well.
The value of any property will be affected by its location.
However, location is far from the only factor that matters. One such factor you do not want to overlook when negotiating any real estate deals is timing.
Let’s first look at things from the perspective of a buyer.
According to Quicken Loans, looking for a new home during the spring or summer means you will have more options to choose from. Meanwhile, you have more leverage if you buy during the winter.
The site notes that shopping for a new home during August or September would be best. By waiting until then, they say that you will still have some good options available as well as a decent amount of leverage.
On the other hand, you should consider selling your home in time for spring or summer. That way, your property will be seen by more buyers, and you could end up getting some above-market offers.
Timing is important if you want to maximize your opportunities in the real estate market. Do not forget that as you decide what to do with your home.
How Does Your Family Feel about Potentially Moving?
You should not view decisions like moving to a new home solely from a cost-benefit standpoint. You must consider the impact this could have on your household.
First and foremost, you must account for how the move could potentially affect your children.
Your kids may already have friends in your current neighborhood. Saying goodbye to those friends could be tough for them. The internet can bridge the gap between them after the move, but it is still not a complete replacement for hanging out in person.
It is also a good idea to research the schools in your potential new neighborhood before moving. Make sure that the schools there are fully capable of educating your children properly.
You also need to account for your circle of friends, your partner’s circle of friends, and any family members you have in the area. Are you willing to move away from them?
Buying and then moving into a new home does more than take a financial toll on you. It can also force you and your family to make emotional adjustments, and you must be aware of that.
Have You Found the Ideal Home?
A new home could turn out to be the biggest purchase you ever make in your life. It is not a decision you should make on a whim.
Take the time to carefully research areas around the country until you find the place that suits your family best. After finding the state you want to move to, it is time to research the counties and cities. Gather as much information as you can until you find the best neighborhood for your family.
Of course, the search does not end there.
You still need to learn more about the available properties in the area. See if any of them are in your price range and check if they have the features you need. Consult with realtors in the area to make your search easier.
The search for your new home is going to take a while. Also, there is no guarantee that you will even find it.
Do not worry if you cannot find a new property that perfectly suits your family’s needs. You can still renovate your current home and turn it into the ideal long-term property.
Do You Have Enough Space?
Starting a family means you must make some big changes. Often, you must make changes to your spending habits so you can set aside money for your children’s education. You also must carefully craft a budget that includes food and living expenses for your kids.
Do not forget about their living accommodations as well.
Your kids may be fine staying in one room early on, but that will change soon enough. As they grow, you need to give them dedicated rooms to enjoy more privacy.
If your home is on the smaller side, you cannot give your kids those rooms. For that reason, you should look to either renovate or buy a new home.
Change the layout of your home so your children can get their rooms. Alternatively, you can build an accessory dwelling unit to accommodate them better.
How Many Risks Are You Willing to Take On?
Lastly, decide how many risks you are willing to take before making your next move.
Generally, you can regard homes as safe investments, but they are not guaranteed to yield great returns. The housing market could collapse in your area, and you may find yourself staring at a loss.
Investing in real estate is risky, whether buying a new home or remodeling your current one. The difference lies in how risky they inherently are.
Buying a new home is riskier, given the amount of money you must spend. You could also sell your current home too early and miss out on some big gains.
Real estate agents can give you a better sense of the market. They can help you make a better decision, but it is still not guaranteed to be the best move for you financially.
Whether you are looking to renovate your home or build a new one, we at Eco Minded Solutions can help out. Reach out to us today and start setting that exciting project into motion!
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