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How do I: Decide to remodel or buy a new home?

By Jessica Seubert • Bankrate.com

Topic: MORTGAGE
Who is affected: Homeownership
DEGREE OF DIFFICULTY: Easy
What you'll need: Plan for remodeling; Project cost and home resale value

What you need to know

Living in your home year after year, you can get tired of looking at the same old kitchen countertops. Throughout the house, you see that the guest bathroom's now too small and the living room could use some work. After taking inventory, you need to make a decision -- fix up what you have, or buy a new home?

When choosing whether to remodel your home or buy new, remember that more than just your home comes into play. Consider the following:

  • Check out your neighborhood: Have many other homes made upgrades?
  • Do you like your neighbors, or would you enjoy meeting new people?
  • Would your proposed upgrades put your home in a higher price range than the others surrounding it?

If after looking around the neighborhood you see that upgrades haven't been made to the degree that you were looking to remodel, it may be time to look elsewhere. In making the decision to move, don't forget to factor in the costs of selling your old home and buying a new home.

However, if you decide you love your neighborhood and a new bathroom wouldn't put you over the resale limit, remodeling may be the way to go.

Step-by-step
If you decide to buy a home, enter the mortgage amount, term and interest rate to create an estimated amortization schedule for your mortgage.
Mortgage amount:
Select a product:
Interest rate:
Go
  1. Which makes more sense, move or remodel?
  2. 6 home renovations with major payoffs
  3. Bankrate's 2007 Home Improvement Guide
  4. Remodel while helping the environment
  5. Makeover tips that can sell your home
  6. Should she move or remodel?
  7. Dealing wisely with home equity
  1. Home equity loan or line of credit?
  2. How much credit can you qualify for?
  3. How much tile will you need?
  4. How much paint will you need?
Make sure you know the particulars regarding your plot of land. Some plots won't have enough room for your planned remodeling. Others have restrictions from the city or homeowner's associations.
Many experts recommend keeping total renovation costs to less than 20 percent of a home's value. Remembering this rule of thumb can help you determine whether it's time to remodel or buy new.

 

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Posted: Jan. 1, 2010
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About this index
Home Equity Averages
Product Rate +/- Last week
$30K HELOC
4.98% 4.99%
$30K home equity loan
6.17% 6.19%
$50K HELOC
4.56% 4.56%
$75K home equity loan
5.94% 5.97%
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