Renovate or move?
Before calling up your real estate agent, decide if you might be better off making a few improvements to your current home.
While it may have felt like the perfect match at the time, for many Canadians, the notion of the "forever" home appears to have gone straight out the picture window. With interest rates exceptionally low, many of us are showing signs of restlessness — warming to the idea of a bigger and better home. It's like a kind of real estate seven-year itch.
A new study has found that two-thirds of Canadian repeat home buyers are moving on to larger or more luxurious homes, and many are making the move earlier than originally planned. The TD Canada Trust's Repeat Home Buyers Report shows that the number of people intending to buy a home in the next two years that will not be their first increased nearly 10 per cent over last year (to 74 per cent versus 65 per cent in 2010).
With data showing many of us may not be staying in one home very long, it's worthwhile to research whether there may be better options financially than pulling up stakes.
Should you stay or should you go?
There are costs associated with both staying and going. The TD survey revealed five areas where Canadians felt they compromised in their last move, and which they say they won't be budging on with their next move: price, layout of the home, features of the home, garage or sheltered parking, and number of bedrooms.
If your home is located exactly where you'd like to be, the area provides everything you need for your lifestyle, and if you plan to stay within the area, then renovating your existing home may be the way to go. But if you want access to better schools, a larger yard, or a quieter neighbourhood closer to friends and family, then moving may be your preferred route.
Costs to consider:
Renovating involves not only the cost of the work, but challenges such as living in a building site while the home is being renovated, and managing contractors and builders.
For out of pocket renovation costs, experts recommend adding 10 per cent to 20 per cent to any estimates contractors provide as a safety buffer.
If you are adding square footage to your house, besides obtaining the proper building permits, there will be extra charges for utility bills, insurance premiums and property taxes due to the additional space.
Ask a real estate professional if the renovation will add value to your home. Resale is important to consider when making changes. Swimming pools, for example, rarely add value.
The costs really add up when buying or selling a home:
Real estate commissions, land transfer taxes, legal fees, closing and moving costs can total tens of thousands of dollars. Tack on a new — and likely bigger — mortgage, multiplied by the length of time you expect to live there, as well as the costs of higher utility bills, larger homeowners insurance premiums, and higher property taxes.
You may also need new items when changing homes. Consider "settling in" expenses, such as new furniture, window treatments, landscaping equipment, etc. Also to be considered are the personal costs of the family's adjustment to a new area and school system. Your children will need to make new friends at school, you'll need to find a new family doctor and new places to do the grocery shopping.
If you have no desire to change your location, and renovation feels like a good alternative to moving, you might consider doing the work in stages. That way you can prioritize which projects you want to take on first. A home equity line of credit could provide the funding by allowing you to use a portion of any equity you've built up in your home to borrow money.
The decision to renovate or move is a personal one, involving the needs of your family, the size of your budget -- and sometimes, maybe even the need for a bit of space. It may be impossible to avoid the seven-year itch, but being aware of its existence can help you consider your options before slamming the door on your dream home.
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