How to choose whether to move or remodel

By Michele Lerner • Bankrate.com

Move or remodel? If you are dissatisfied with your home, you might wonder  whether it’s better to buy another house or remodel the one you own. The choice  involves both financial and emotional calculations.

“Deciding whether to move or to remodel is a life conversation, not just a  money conversation,” says Justin Krane, president of Krane Financial Solutions,  in Los Angeles. “You should always start with life first, because thinking about  money first can get in the way of figuring out what we really want.”

Chris Terrill, CEO of HomeAdvisor in Golden, Colo., says homeowners need to  start the decision-making process by evaluating their motivations for  change.

“I think people have become more aware that they need to ‘move with a  purpose,'” Terrill says. “If you must relocate for your job or your commute is  too long, that’s one thing, but if you feel you’ve hit the maximum capacity of  your space, you may want to consider investing in your existing home.”

Once you’ve evaluated your desire, such as for more space, think hard about  the emotional aspect of moving.

“If you love your neighborhood, your neighbors, your backyard, your commute  and your children’s school, then you need to realize that these are things that  are hard to replace,” says Dan Fritschen, creator of RemodelOrMove.com and  author of “Remodel or Move? Make the Right Decision.” “You need to think about  how your home functions during the entire year, including your ability to  entertain.”

Financial implications of moving

Before deciding to move, consult a real estate agent and a lender to get an  evaluation of your home’s market value, the cost of the type of home you want to  buy and your financing options.

“Your new mortgage payments could be lower because of today’s low mortgage rates  and low home prices, which could offset a lower-than-expected sales price on  your home,” Fritschen says. “You also need to know the difference in property  taxes and calculate the potential money you may need to spend to get the next  house fixed to your preferences.”
Terrill adds: “The real cost of selling includes the real estate commission on  the sale, possibly some repairs on your home before you can sell it, closing  costs on your new property, moving costs and perhaps new furniture.”

Financial implications of remodeling

While Krane recommends funding a remodel through cash flow or savings, he  says a home equity loan could be an option for some homeowners as long as they  have a repayment plan.

Fritschen says homeowners with equity may be able to refinance and pull cash  out for a remodel, or refinance into a Federal Housing Administration 203(k)  loan that allows the borrower to wrap remodeling costs into the new  mortgage.

“You need to get a feel for what your project will cost before you can decide  if it’s worth it,” Fritschen says. “Then you can estimate potential appreciation  in your home value from the project. It’s also important to think about the  intangible value of the improvement in terms of your quality of  life.”

 

Terrill says adding square footage can be the best remodeling investment,  followed by fixing up a kitchen or bathroom. He urges caution about  over-improving the home for the neighborhood.

“If you are living in a community of $250,000 homes and you upgrade with a  $150,000 kitchen, you may not get your money back when you sell,” Terrill says.  “On the other hand, if you love cooking and you can afford it, the renovation  has emotional value.”

Terrill says homeowners should use a variety of resources, including local  contractors, real estate agents, neighbors, online resources and visits to open  houses to estimate whether a project would be an over-improvement for the  neighborhood.

Source:  MSN Real Estate

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