Time To Move or Time To Improve
Your family is growing out of your home, and you're desperate for more living space. Your house could also use a major face-lift. Does this sound like you? If so, it might be time to move or improve.
Is it better to move to a new house or improve your current home? Either way, it's a big decision. The right answer will depend on your financial situation and other personal circumstances. We’ve outlined the pros and cons of each choice so you can make the best decision for you.
Moving to a new home
For most people, a home is the largest purchase they will make during their lifetime. Saving up for a down payment on a home can take years, and many months of planning and wise decision-making are required before a home purchase is finalized.
Pros of moving:
- Opportunity for a fresh start. You can choose a new location that better suits your needs, such as a superior school district, proximity to family or work, or a more desirable community.
- More living space. This is especially beneficial if you have a growing family or want to add more amenities to your home, such as a home office, designated playroom, or gym.
- Potential for appreciation. If you buy a home in an area experiencing growth, your property value may increase over time, resulting in a return on investment.
- No dealing with renovations. If you purchase a home already in move-in condition, you won’t have to deal with the headache of renovations.
Cons of moving:
- Exorbitant upfront costs. Moving to a new home doesn’t come cheaply. You’ll need to spring for closing costs, a down payment, the actual move, and any new furniture you may need to purchase for your new residence. Selling your current home will also cost you renovations, agent fees, and title insurance.
- Emotional attachment to your home. Did your son take his first steps in the kitchen of your current home? Did your dog have her puppies in the garage? You may be reluctant to leave if you’ve lived in this home for many years, and it holds many happy memories.
- Difficulty finding the perfect home. You may need to settle for a less-than-perfect home in many ways. That may end in more stress and regret.
- The stress of selling your home. The housing market is unpredictable, and you may not be able to sell your current home for the desired price. Of course, this does not apply to you if you don’t own your current home.
- Potentially higher interest rate on your mortgage. If rates have increased since you bought or refinanced your current home, or your credit score has slid, you may have a higher interest rate on your new mortgage. That could mean paying much more in the long run.
Questions to ask before deciding to move
Before you go ahead with the decision to move to a new home, ask yourself these questions:
- What are the market conditions like in my current neighborhood? Will I be able to get the price I am asking for on my home within a short amount of time?
- What are the market conditions like in my desired neighborhood, and how are they trending? Will I be able to find a home that suits my needs and is within my price range?
- Do I have enough money saved up to pay for the move? Will I need to wait until I sell my home or take out a bridge loan to cover the gap?
- Is this a good time for my family to move?
Improving your current home
Improving your current home could be the right choice for you, and you can use a Home Equity Line of Credit (HELOC) to help. A HELOC gives you quick access to cash by using your home as collateral. You can withdraw the funds, as needed, over a period known as the draw period. When this time is over, you’ll no longer be able to advance funds and will repay the loan, with interest, over the repayment period.
You can also take out a Home Equity Loan (HEL), which will provide you with one lump sum, generally at a fixed rate and payment, that you start paying back immediately.
Pros of improving your home:
- Completely customized to fit your needs. When you design your own home, you can customize it to suit your family’s needs and tastes perfectly. Think trampoline floors in the playroom and built-in bookshelves in the family room.
- No stress of relocating. When you renovate your home, you can enjoy the same home and neighborhood you’ve lived in for years.
- Increase the value of your home. Home improvement projects increase your home’s value, increasing your net profit when you decide to sell in the future.
- Save on moving costs. Why pay thousands of dollars in closing and moving costs when you can have a beautiful new living room for the same price?
Cons of improving your home:
- The stress of renovations. Dealing with a home improvement project can be super stressful. There are loads of decisions to make, an endless mess, and workers in your home at all hours of the day.
- Risk of foreclosure. Taking out a HELOC or HEL puts your home at risk of foreclosure if you cannot make the payments. This can have long-term consequences on your credit score and financial stability.
- Additional debt. A HELOC or HEL adds another debt to pay each month, which can burden your budget.
Questions to ask before deciding to improve your home
Before you go ahead with the decision to improve your current home, ask yourself these questions:
- Can I afford the monthly payments on a HELOC?
- How much will a home improvement project cost me?
- Will I be able to handle living in a construction zone?
- Do I want to continue living in this neighborhood?
Whether you choose to move to a new home or renovate your current home, we can help! At Elevate Credit Union, we have home loans, HELOCs, and HELs with competitive interest rates, easy eligibility terms, and the personal, hometown service you’ve come to expect. Call, click, or stop by today to learn more.
If you enjoyed this article and want more home tips, check out the rest of our MoneySmart Tips blog.
Your Turn: Have you chosen to move or to improve? Tell us what drove your choice in the comments.