Dear Dr. Don,
I have been in my current home for 12 years and would like to get a newer home in a better neighborhood. I owe about $60,000 on the current home and have been pre-approved for $200,000 for the future home. I currently have a three-quarter bath that I could expand to a full bath.
Every home that I have seen out there at the price I have been pre-approved for is disgusting. I am wondering if it would be better to stay in my current home and expand the bathroom rather than seek a house that I probably would not be able to afford. What do you think?
-- Cheryl Construction
Dear Cheryl,
If you aren't going to be able to trade up, there's not much incentive to move on. I had to look up what a three-quarter bath is since I had only heard of half baths, full baths and powder rooms. If having a tub instead of a shower is going to do it for you, then you should go for it.
The Bankrate feature, " Home remodeling: Pick renovations that pay off," points out, "A midrange bath remodel (less than $10,000) placed third in the 2004 survey with a ROI of 90.1 percent."
ROI is return on investment, and while in most investments I wouldn't get excited about a negative 9.9 percent return, if it means you can be happy in your existing home and avoid the expense of selling the place, finding a new place, closing costs on the new loan and the whole hassle of moving; then losing $990 on a $10,000 bathroom remodel doesn't look too bad.
Bankrate has a host of features that can help you decide how to finance the home improvement project and it will even walk you through the decision to remodel or sell, but if you can't find anything you like in your price range then I agree that you shouldn't stretch to take on a mortgage that you can't afford. Just make sure you can carry the home equity payments on your new bathroom.