This is the great debate around many household dinner tables nowadays: improve or move? With all the attention the real estate market is getting these days in the local and national media, I’m surprised everybody isn’t cashing in, selling and moving. Everybody who owns real estate is holding their very own lottery ticket, each with a slightly different purse.
Sell your home for lots of cash and buy new; what could be easier! There is definitely something to be said about buying new and ‘shiny’ with a warranty. It’s glamorous, it’s easy and it makes for great Facebook posts.
On the flipside, posting before-and-after pictures of a renovation could be more impactful. You could even use the platform as a confirmation tool with picking wall colors, countertop material or even layout.
You don’t have to sell to win the lottery. The equity in your home could also be viewed as the lottery proceeds. In my opinion if there isn’t enough thought put into staying in the current home and improving the living space these days. Bear in mind, there are valid reasons why you have lived there so long: an established network of friends, close to school, convenience for day-to-day amenities, access to work, beautiful big back yard (new homes have small yards nowadays), family activities, kids sporting programs; the reasons are endless to stay. But one could also say there are many reasons for moving.
My only intention for this blog post is to create questions and have you think about what the best option might be; improve or move. Don’t always jump at the dangling carrot; there could be other options.
One could argue that deciding to sell and move is the easier of the two. All that you need to do is to call your trusted Realtor and suddenly (these days very quickly) your home is sold. But is that the more financially sound choice?
Here are the costs to consider when selling your home.
- Approx Realtor fees: 3.50% on the 1st $100K, 1.15% on the balance
- Potential mortgage penalty: Based on the balance, or it can be ported
- Lawyer fees: $2,000 (sell and buy)
- Property repairs: TBD; major repairs or just minor touch ups?
- Movers: Professional movers $2,500 or friends/family
- Inspection: $400-500 buying new property
- Appraisal: $300 buying new property with 20% down or more
- Property Transfer Tax: 1% on the first $200K & 2% on the remaining bal. (purchase)
- Mortgage payment: Difference between mortgage payments (old and new) is a cost
- GST: Are you buying a brand new home?
The other side to the equation is staying in your current home and making it better; more livable, shiny, new, fresh…Facebook worthy!
Here are the costs to consider when improving or renovating your home. This scenario makes the assumption that you will be accessing your equity to improve your home.
- Appraisal: $300; to determine market value for equity leveraging
- Mortgage payment: What is the overall increase per month with the additional funds?
- Permits/Plans: Are renos structure or surface? New floors, new paint etc…
- Product to be used: Cost to purchase new flooring, paint etc…
- Demolition: Cost of disposing of the materials correctly.
- Installation: Can you do it or do you need to hire a contractor?
Both scenarios create disruptions in life. Which one makes more sense for you and your family? Moving can have long-term effects, whereas improving is a short-term impact with living in a construction zone.
Either of the options is a great journey; don’t focus on the destination. Before you decide, make sure you consult with your Dominion Lending Centres Mortgage Broker first to consider all the costs and qualifying ramifications. The lending landscape is constantly changing; don’t assume you will qualify for a mortgage today because you qualified for one 5, 10, 15, 20…years ago.
Thank you to my DLC colleague Michael Hallett for the article.