Changing life circumstances mean that all homeowners are inevitably faced with a decision when upgrading their home – should I renovate, or move? Each option has its benefits and drawbacks which are discussed here.
Renovate
You’ve bought your property and settled into an area you love. Your kids might be settled at school, you might be close to parks, the beach, public transport, or made friends and have decided to stay and improve your property. These improvements can take a couple of different forms.
You may find that the current layout and size of your property is perfect for your needs, but it may be looking a little tired and in need of modernising with a makeover. This type of renovation is by far the most affordable and is the least hassle. A new kitchen can be installed for around $20,000, a bathroom could cost $15,000. The addition of a back deck can create an extra outdoor living area and cost similar.
However, a simple renovation isn’t going to meet your needs if your family is growing, or if you’re working from home and need to create extra space for a home office. Major improvements can include adding an extra storey to create extra rooms. It may involve knocking down walls to create more open living spaces. Depending on the scale of your renovation, these costs can run into the hundreds of thousands of dollars.
The key here is not to overcapitalise. Consider your current property, and let’s say you have a 2 bedroom home worth $1.1 million. You’ve decided to modernise the existing home, and extend up and build a third bedroom and a new bathroom, with a budget of $300,000. You should then consider what price similar 3 bedroom homes in your street might be worth. If it is under $1.4 million, you may be tipping more into the project than it’s worth.
Move
You’ve done your homework and decided that moving is your best option. Yes you could renovate your current property, but no amount of work is going to make your block size bigger and give you that backyard you desire. Or possibly you’ve engaged a builder and decided that to redo wiring or plumbing or replaster old walls isn’t worth the effort and cost.
Upgrading to a different home means you can simply move into something that’s perfect from day one. It also means you don’t have to look for another place to live whilst you’re renovating.
However, the costs to move need also to be taken into account and could weigh heavily on your decision. Assuming again you have an existing property which you sell for $1.1 million. The selling costs with agents commission could cost you around $25,000. If you were to buy a new home for $1.4 million, you should expect to pay around $65,000 in stamp duty, transfer and legal fees. That’s $90,000 which you may consider worthwhile tipping into your existing property instead.
The decision to renovate or move often isn’t an easy one, and its’ best to refer back to real estate agents, builders, engineers or surveyors to find out more information. The first step however should be to speak with a finance professional, who can review your current financial situation and advise whether either alternative is achievable.
Tower Mortgage Broking are a professional Sydney based mortgage broker. For expert home loan advice on how much you can afford to upgrade your home, contact us today.