Most people have a vision for their “dream home” and it isn’t the house in which they currently live. If you want a better home for yourself, the obvious choice is to start looking for a new home, possibly designing one from scratch so it has everything you want. But you might also consider remodeling your existing home, adding, removing, or changing various rooms or installing new fixtures to bring it closer to your vision.
Which of these options is better for your budget? And what about your end results? Should you move or simply remodel?
The Financial Perspective: Capital and ROI
Let’s start with a close look at the financial perspective. Buying a home is one of the biggest financial decisions you’ll ever make—but buying your second home isn’t typically quite as enormous an undertaking. Assuming your existing house sells quickly, and assuming you have a good deal of equity in the home, you should have ample capital to use for the down payment of your next home. And even if your next home is more expensive than this one, your monthly mortgage payments shouldn’t skyrocket.
That said, if you’re making a major upgrade, a renovation can still be much less expensive. For example, let’s say you’re currently paying $1,500 a month on your mortgage, and you’re considering moving to a house that would result in a mortgage of $2,000 a month. A kitchen remodel, on average, is something like $25,000—but we also have to consider the return on investment (ROI) the remodel brings. In other words, how much value is this remodel adding to your home, compared to how much it cost?
Remodeling ROI varies but is typically quite high; if you spend $25,000 on a kitchen renovation, it should easily add $15,000 in value to your home, resulting in a net cost of $10,000. That’s about 20 years of higher expenses from your new mortgage payments—in other words, a renovation works slightly in your favor.
There are too many variables to make a definitive claim here, since it’s possible to complete your desired renovation on a budget, and it’s also possible to find a new home you love at a reasonable price.
The Logistical Perspective: Time and Effort
You’ll also have to consider the time and effort you spend during each process. Looking for a home to buy is a long, intensive process for most people; it can take months, or even years to find your dream home, depending on both local market conditions and how picky you are. If you’re interested in designing and building a home from scratch, you’ll have more flexibility with the features you choose, but if you’re looking for an older home, it may take ages to find the home you want. Plus, if you’re building a home, it could take a year or more to complete.
Renovations are typically faster. Even if you’re redoing multiple rooms and giving them a complete overhaul, you should still be on a timescale of weeks—not months. The bigger problem with renovations is finding someone trustworthy to get the job done, and get it done right. You’ll have to spend time vetting contractors (or learning the skills yourself), and even then, there’s no guarantee it’s going to look perfect when it’s done.
Ultimately, this is something of a subjective choice. Would you rather risk modifying your existing house, with significant short-term stress but fast results? Or would you rather take your time, knowing you may not find exactly what you’re looking for in a new home?
The End Results
Finally, think about the end results you want to achieve. What is your ultimate dream home?
Do you love your current neighborhood, and you can’t imagine leaving it, or does this house carry significant nostalgia for you? If so, renovating may be the much more favorable option. If you have no real attachment to this location, moving may be a better choice.
Also think about how much of your house you’re interested in changing. Is it just an ugly kitchen or bathroom that wears on you, or is the entire layout unsettling? The more you want to change, the less feasible a renovation becomes. And if you have a perfect vision for what you eventually want, you may want to build a house from scratch instead of hunting for one that aligns with your desires.
So is it better to remodel your existing home or start looking for a new one? That depends entirely on your situation. If you love your current location and there are only a few things you want to change, a remodel is the superior option. But if you’re iffy on the location or you’re not sure you want to stay in this home forever, don’t waste your time and money remodeling.