Move Home or Improve?
Bill and Beth were in a bit of a quandary. They recently bought their home in a neighbourhood they love, but a house a few blocks away recently came up for sale and it has an extra bedroom and a beautiful bathroom, complete with Jacuzzi tub. Should they try to buy the other house and move? Bill has his own removals firm, so this would not be a big issue. Alternatively, should they try to make the same type of improvements to the house they already own?
Realtors and other experts generally agree that it is usually less expensive to renovate your current home than to move to another in the same neighbourhood. Think about it. When you buy a new home, you have closing costs, commissions, and the actual move and do not forget all of the stress involved. Tim Perry, in his book “The Book of Home Purchase”, says, “If you buy a house in today’s market you are going to pay the same for a crummy house as you do for a good house.” Especially in the “hot” markets, it would serve you better to improve on your current property, and possibly sell it in the future for one of those “hot” prices.
So if you do choose to remodel, what type of value will be adding to your home? Well Remodelling On line’s 1998-1999 Cost vs. Value report indicates which jobs provide the most return based on the national average of selling your home one-year after the home improvement job is complete. After a year, just like a car, the improvements depreciate.
Minor Kitchen Remodel 94% Bathroom addition 89% Major kitchen remodel 87% Family room addition 84% Two-story addition 84% Attic bedroom 83% Master suite 82% Bathroom remodel 73% Siding replacement 71% Deck addition 70% Window replacement 68% Home office 64%
So what are your options when it comes to paying for these improvements? Well, you have several choices.
- Traditional Home Equity Loan– This is for people with enough equity to cover the cost of your remodelling job. The equity is the value of your house minus the amount of the mortgage. Be aware of the interest rate hikes of recent days, though, when considering this option.
- A Cash-Out Refinance–This enables you to tap into your equity and hopefully receive a lower interest rate at the same time. From Fannie Mae, the nation’s major source of mortgage money: For example, if your home is now valued at £150,000 and your loan balance is £80,000, you might be able to get a new £112,500 mortgage (cash-out refinances generally are limited to 75 percent of the total value of your home). That would allow you to repay the existing £80,000 balance and use the £32,500 for your financial needs.