To Sell or to Renovate? Find Out What Is Best for You With These 7 Questions
The real estate market is hot, hot, hot … just like the home renovation sector. How can you make an informed decision when your home no longer meets your needs?
Should you stay or sell? We aren’t talking about the popular TV show, but of a question more and more homeowners are asking themselves. Here are the points you should consider when weighting your options.
If your mortgage rate is low, it may be that renovating—and not buying a new residence at a higher interest rate—is more advantageous.
1. What Is Your Current Interest Rate?
If your current rate is low, it is best to stay to the course, or to change over to a fixed-rate mortgage. The Bank of Canada has raised its key interest rate to 0.5%. Analysts predict that it will reach 2% by the end of the year. Therefore, according to several experts, mortgage interest rate hikes should be expected sooner rather than later. But of course, they may be wrong!
2. Can You Wait?
If mortgage rates rise, it could ease the housing market by adding more properties to the available stock. Consequently, your patience may be rewarded with greater choice when you do start looking for your next residence. Will you take advantage of such an opportunity to buy?
To determine if you should sell or renovate, one of the seven questions you should ponder is if your neighbourhood still corresponds to your lifestyle.
3. Do You Like Your Neighbourhood?
Family-oriented neighbourhoods are quite popular right now. If you’re lucky enough to live in one, you are well positioned in the current market! Especially if you love your community but the properties there are expensive. If this is the case, it might be best to stay put and renovate.
4. How Much Is Your House Worth?
Also called the “net value,” equity is the difference between your property’s market value and its mortgage balance. On the one hand, you could use your equity to finance your renovations. On the other, it could be put toward the purchase of a new home that meets your needs better. Depending on how much equity you have accumulated, you may favour one option over another. Consult a mortgage professional to weigh the pros and cons!
5. What Is Your Budget?
For a New House
What mortgage amount can you afford while leaving room in your budget for all your other expenses? Do you have money set aside to pay for the move, welcome tax, notary fees, etc.? Crunching the numbers can be enlightening when it comes to making your decision!
To Renovate Your Current House
As a rule, renovating the kitchen, bathroom, basement, or flooring offers the biggest bang for your buck when it comes to a home’s resale value. Is this the kind of project you want to take on?
To estimate the potential costs, you should expect to spend on average $200 per square foot to renovate any given room, adding 10% to 15% for contingencies. Yes, you must plan for the unexpected! Extension, electrical and plumbing work can really do a number on the budget!
Furthermore, have you considered the cost of storing your belongings while you complete such major renovations? Will you want to continue to live in your house amidst all the dust and mess, or must you find a temporary residence? All this needs to be taken into account!
For a less stressful decision-making process, go over your questions with a financial advisor or a real estate broker.
6. How Much Stress Can You Handle Right Now?
The pandemic has caused many people’s anxiety levels to rise over the past two years. And the current state of the world is doing nothing to help everyone get back to normal. Dealing with renovations or a move is likely to make anyone’s summer even worse. What about yourself: do you think you could cope with any extra stress? For added clarity, consult experts such as a financial advisor or a broker.
7. Do You Know a Reliable Contractor?
The demand for residential renovation has exploded, especially in remoter regions. That has led to an increase in prices and in the demand for labour, decreasing contractor availability. Many businesses have waiting lists of up to two years. Are you willing to defer your plans, or would you prefer to move?
You should also consider whether the renovations you want to carry out are purely aesthetic. If so, maybe you could do them yourself and reduce the frustration of having to manage a large construction site?
We understand how difficult a question this can be. One thing is certain, though: whether you renovate or put your home on the market, you will have no regrets if you analyze all your options.