Should I Stay or Should I Go?
06/15/2021 Corinne Browne
Not sure if you can turn your current house into your dream home or if you just need to start over with a new space? Making a decision on whether to renovate your current home or make the move to buy a new one can be emotionally and financially complicated. There also may be aspects of the “stay vs. go” equation you have not yet contemplated.
To learn about the factors involved, we spoke with real estate expert Brendon DeSimone. DeSimone has more than a decade of residential real estate experience across the U.S., and is the author of "Next Generation Real Estate: New Rules for Smarter Home Buying & Faster Selling."
Here's a quick rundown of considerations on DeSimone’s list:
Early Estimate: Ask a Realtor® to provide you with a comparative home analysis to estimate the value of your current home. Next, obtain a pre-approval from a mortgage lender (like Pennymac) to find out how much house you can afford. "Then ask your agent to show you houses at that price point for a few Sundays," DeSimone suggests. Are they superior to your house with the features you seek, or not entirely? Will the move be worth it for those improvements or would renovating your current home work out better for you? DeSimone reminds homeowners to ask themselves, "Are you going through a lot of stress just to get an extra bedroom?" To answer this question depends on your own lifestyle needs — Is that new bedroom now crucial to accommodate a new member of the household or your new work-at-home plans?
Location Limits: Do you love where you live right now? If you adore your neighborhood or town but your house just isn't appropriately sized for you and your loved ones, consider adding on, whether that's another bathroom or second story, DeSimone suggests. On the other hand, families may weigh the desire for a new school district with better academic programs, while some individuals might want to move closer to work.
Renovation Reality-Check: Hire an architect or contractor to help pinpoint issues with your current house and decide what you need from your home, he suggests. Get estimates on how long adding a second story might take, how much it might cost and "whether you have the stomach for that," DeSimone says.
Stress Tolerance: Buying and selling at the same time can be stressful, DeSimone warns. It can take months to organize your home and put it on the market. "There's a lot of financial and emotional uncertainty when buying and selling," he says. "You may not get the sale price you want, or end up in a smaller house. There are so many unknowns."
Contingency Acceptance: In some markets, contingency offers are allowed, which means your bid for a house is contingent on the sale of your former abode. In other markets, homebuyer feeding frenzies can prohibit contingent offers. "When you put your house on the market, you have to decide if you'll buy a new house first," DeSimone says, or make a contingent offer. If contingent offers are out of the question, a temporary rental may be required after escrow closes on your old home, and you’re still looking for your next one.
Closing Costs: It may be much less expensive to stay in your house and renovate, after figuring in closing costs, commission, title insurance, and additional transaction costs involved in your home sale and purchase, DeSimone notes. Don't forget to calculate those costs.
Rate Realities: If you purchased your home years ago and have a higher interest rate than what the current market can offer, compare keeping your mortgage — and perhaps refinancing at a lower rate to make upgrades — to getting a new house with a new mortgage at a lower rate, DeSimone says. Either way, a lower rate market can prove to be very favorable whether you stay and renovate or go and start fresh.
Move Motivators: Who are the individuals most content with a decision to sell? Those who've completely outgrown their current house and adding on isn't an option, or who are too busy to manage a big renovation project, DeSimone observes. And there are also those who just have too small a lot to work with, need to move closer to work, or don't want to invest in creating "the best house in the worst neighborhood," DeSimone says.
Downsizing Decisions: Those in their 50s and 60s are often uniquely ready to leave behind the maintenance (and lawn) of their current home, DeSimone says. Trading in the three-bedroom home for a low-upkeep city condo provides more opportunities for enjoying the retirement years.
Making a final decision is as personal and individual as the home you're thinking about giving up or buying. But with the right calculations and information, you're closer to finding a solution that works long-term for your financial, physical and emotional health.
Want to know how a cash-out refinance can help you with your renovation dreams or how much you can afford for a new home? Speak with a Pennymac loan expert to explore your options today.