When your home no longer fits your needs and lifestyle, you're left with two options: renovating your home or buying new.
However, determining which option is best for you can be tricky.
Renovating sometimes can be faster but can it actually cost you more?
Let us explain.
Most renovations will require a cash investment to pay for labour and/or materials. Alternatively, you may have the option to set up or use an existing credit facility like a credit line or credit card. This works just fine but it also adds to your monthly costs by adding additional payments on top of your existing mortgage and household costs.
When you purchase a new home we can take the equity from your current home, set you up with a new mortgage and most often keep your payment the same and even lower it. This keeps the cash that you would have otherwise used for your renovation in your pocket to be used for that special something or someone. In short – buying a new home can be less costly up-front, give you more options and is usually a better long-term investment.
Here's how to determine if renovating or buying is the choice for you.
Many renovations offer a great return on investment but it's not something you can count on. If your home is already in the upper-value limit in your neighbourhood, renovations are unlikely to give you a strong return.
Major renovations are also unlikely to offer the same return on investment as minor to moderate improvements, something like a bathroom remodel for example. Unless you’re sure this is the home you will live in for a long time and your home's value isn't a major concern, it pays to consider the return on investment of the renovations you're considering.
You should speak with a real estate agent to discuss your plans. An agent can help you assess your home's value and the anticipated value of your home post renovations.
In most cases, expensive renovations only pay off when you stay in the home for a long time. If you’re concerned about recovering some (or most) of the cost when you sell, it may be anywhere from five to ten or more years before your home appreciates in value and the investment pays off.
A renovation is a good option if it can solve the issues you have with your home and you'll be able to stay for the long run.
It's a common assumption that renovating your current home will cost less than buying a new home but this isn't necessarily true. To make an informed decision, get estimates for the renovations you’re considering. You may be shocked to learn something that seems relatively straightforward can cost thousands of dollars. Your renovation budget may not stretch as far as you thought.
Even worse, you may not recover the money you spend when it's time to sell.
Something else that happens frequently is other problems come up during a renovation; these issues will only add to your costs. Hidden costs of renovations can include bringing your home up to code, construction permits, unsafe or incorrect building practices, pest damage, and even the cost to live in a hotel and board your pets during the remodel.
Depending on the type of remodelling you're planning, it may give the option to give you the home you need. Or, it may be a waste of your hard-earned money. If your home simply needs a facelift or moderate changes, renovations are the best way to go. Modernizing your home with a bathroom and kitchen remodelling, new flooring, and new countertops can all improve your home's value and usually offer a decent return.
There are some home renovations that usually pay off well you can do, so if these ideas are what you're thinking, renos are a good route to take.
Adding square footage to your home is one of the most expensive renovations you can undertake and it usually costs more than you think. The most affordable way to add usable space to your home is finishing a basement. If this is an option, go for it!
However, this will only be a good choice if your basement has enough ceiling height, no foundation problems, and a good layout. Hopefully, your mechanical room and furnace isn’t sitting in the middle of the space and can be nicely incorporated into your basement development plan.
You may also be lucky enough to get by with creative uses of your home's existing footprint. Sometimes, it's possible to move a wall, for example, to turn one bedroom into two. Your home won't be physically larger but it can be a better fit for your lifestyle, and at a fraction of the cost of an addition.
It's usually cheaper to add space to your home vertically rather than expanding sideways. If this is a viable option, adding square footage to your home may pay off — or it may not. In general, you will pay between $90 and $225 per square foot of added space. That's assuming you aren't adding a bathroom, which increases the cost. Also, finishing an open attic will be on the lower end of this range.
To determine if the renovation is worth it, compare the cost to the cost of buying a new home per square foot. You may be surprised to learn that buying a new home will actually be cheaper than adding on to your home — even before you consider potential hidden costs associated with a major renovation!
Renovations have their place and when properly done can bring some amazing ideas to life. But please be aware that regardless of how much you spend on a renovation of an older home, it is still an older home. It is always a good idea to keep a reserve fund or “what if” fund on hand to deal with any unexpected maintenance or repair issues. Alternatively, when you purchase a new home they come with a 10-year warranty that is legislated by the Alberta government giving you the comfort and stress-free lifestyle you deserve.
There are many cases in which renovations can help you stay in your home, but they aren't always the right choice. So we've laid it out for you.
Remodelling your home is a good choice if you:
Buying a new home is a better choice if you:
If you ultimately decide that it's in your best interest to look for a new home to fit your needs, please keep TriUrban in mind. At TriUrban, we apply our core values of Time, Family, and Freedom to every client to help you choose a home that's the right fit for your family and fits your values, personal goals, and lifestyle without the pushy sales tactics. We are here to help you — period!