Should You Remodel or Sell Your Home?

Couple remodeling their home

You’ve probably seen or heard of the popular HGTV television show “Love It or List It.” Two hosts work with people to remodel their existing home and also look for a new home that better fits their needs. At the end of the show, the homeowners are asked whether they will stay in their newly renovated home (“Love It”) or sell their home and purchase a new one (“List It”). The problem with shows like these is that they never detail the actual costs associated with these decisions. As a result, big decisions like whether to remodel or sell your home can become clouded with unrealistic expectations. If you’re a homeowner and are considering whether to remodel your existing home or to buy a new home, there are a few items you need to take into consideration.

What You Don’t Learn About

At the end of the show when the property owners are faced with the decision to “Love It” or “List It”, there is a quick review of the financial implications of each option. However, there is very little information on what goes into the figures they show you. Here are a few things they aren’t factoring into the staying or buying decision:

  • Remodel Cost: To perform the type and size of renovations seen on these shows, most people will use a Home Equity Loan. The show never provides information on the interest rates, closing costs, or other expenses associated with the loan to do the remodel.
  • New Home Cost: There are several expenses the homeowners will incur if they 1) sell their existing home and 2) purchase a new home. These include closing costs, a down payment (on the new home), mortgage-related expenses, and more. All these large expenses are conveniently left out of the figures on these shows.
  • Time: No information is ever provided about how long it will take to sell their current home.
  • Long-Term Effect: If the homeowners decide to stay in the remodeled home, how much will the monthly payment be on their Home Equity Loan? How does that factor into their budget long-term?

Considering all of this, it’s hard to see what you may actually end up paying with these two decisions. As a result, it’s important to not take this show or other shows like it as reality.

Work with a Realtor First

If you’re facing the decision of whether to remodel your existing home or move into a new one, your first step should be to speak to an experienced realtor.

  • Ask them to estimate the current sale price of your home, without any renovations.
  • Then, ask them how the renovations you’re planning on doing could affect the estimate. It’s important to note that some improvements may add very little to the overall value of your home, while others can add significant value.
  • Lastly, if you’re considering moving homes, find out from your realtor what homes are selling for in the area and how easy it would be to find something within your budget.
When is it Ideal to Use a Home Equity Loan?
  • Building Equity:

Using the equity in your home to generate even more equity is an excellent idea. Homeowners often accomplish this through home renovations. Whether repairs or remodels, using your existing equity to improve your living space and add more value to your home can be a win-win.

  • Financing Tools:

Another popular way homeowners use their home’s equity is to finance projects, events, or improve their financial situation. These lower-rate loans provide affordable solutions for just about any cause, including:

    • Debt Consolidation
    • Milestone Events (e.g., a wedding)
    • Medical Expenses
    • Higher Education
    • Financial Lifeline

However, you must use these funds responsibly. While it can be tempting to use some funds to jet off to a tropical paradise for a few weeks, it’s probably not worth risking your home.

The Decision to Remodel

If you have decided to remodel your current home, it’s important to get multiple estimates from reputable, licensed companies or contractors in your area. Oftentimes a realtor can provide referrals for companies their clients have used before.

Once you receive the cost estimates, add a little extra to the estimate to cover any unexpected expenses. If you have watched “Love It or List It” before, you know that these unexpected costs always seem to come up along the way.

We’re Here to Help!

Whether you’re looking to remodel your home or purchase a new one, we have the home loan options you need. If you’re considering a remodel, a home equity loan or HELOC might be the perfect solution. For new home purchases, our Home Loan Experts will help you find which mortgage option will work best for your specific goals and financial situation.

Your home is one of the largest financial investments you’ll ever make. We’re here to help you understand your financial options and make the best decision for you. Stop by any branch location or give us a call at 888-777-9982 to learn about all our home loan options.

Disclosures

  • This credit union is federally insured by the National Credit Union Administration.

  • Equal Housing Lender

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