Should You Move or Renovate?
Over the course of the last year and a half, there have been so many changes. This includes what buyers look for in a home. Recently, the American Institute of Architects released their AIA Home Design Trends Survey results for Q3 2021. The survey reveals the following:
- 70% of respondents want more outdoor living space
- 69% of respondents want a home office (48% wanted multiple offices)
- 46% of respondents want a multi-function room/flexible space
- 42% of respondents want an au pair/in-law suite
- 39% of respondents want an exercise room/yoga space
If you’re a homeowner who wants to add any of the above, you have a few options: renovate your current home. buy an existing home that has these items, or start fresh and build a brand new home that you can guarantee will have all of the items you want. Some factors that help determine your decision could be:
- A possible desire to relocate
- The difference in the cost of a renovation versus an existing home versus a new build
- Finding an existing home or designing a brand new home that has exactly what you want (versus trying to restructure the layout of your current home)
No matter what you decided, you’ll need access to capital: the funds for the renovation or the down payment your next home would require. The great news is that the money you need probably already exists in your current home in the form of equity.
Home Equity Is Skyrocketing
The past two years have seen record-setting increases in home prices over that have dramatically improved homeowners’ equity. The graph below uses data from CoreLogic to show the average home equity gain in the first quarter of the last nine years:
Odeta Kushi, Deputy Chief Economist at First American, quantifies the amount of equity homeowners gained recently:
“Remember U.S. households own nearly $35 trillion in owner-occupied real estate, just over $11 trillion in debt, and the remaining ~$24 trillion in equity. In inflation adjusted terms, homeowners in Q2 had an average of $280,000 in equity- a historic high.”
By owning your current home, the money you need to purchase the perfect home or renovate your current house may be right at your fingertips. However, waiting to make your decision could increase the cost of tapping that equity.
In making the decision to renovate, you’ll need to refinance (or take out an equity loan) to access the equity. If you move the other direction and decide to move or build instead and use your equity as a down payment, you’ll still need to mortgage the remaining difference between the down payment and the cost of your next home.
The mortgage rates are forecast to increase over the next year. Waiting to leverage your equity will probably mean you’ll pay more to do so. According to the latest data from the Federal Housing Finance Agency (FHFA), almost 57% of current mortgage holders have a mortgage rate of 4% or below. If you’re one of those homeowners, you can keep your mortgage rate under 4% by doing it now. If you’re one of the 43% of homeowners with a mortgage rate over 4%, you may be able to do a cash-out refinance or buy a more expensive home without significantly increasing your monthly payment.
First Step: Determine the Amount of Equity in Your Home
If you are ready to add additions to your current home or find an existing or newly constructed home that has everything you want, the first thing you need to do is determine how much equity you have in your current home. To do that, you’ll need two things:
- The current mortgage balance on your home
- The current value of your home
You can more than likely find the mortgage balance on your monthly mortgage statement. To figure out the current market value of your house, you can pay several hundreds of dollars for an appraisal, or you can contact a local real estate professional who will be able give you a professional equity assessment report. If you are not sure where to start on that, the team at Faber Builders can always help!
Bottom Line
Whether you are considering renovations or building new, Faber Builders is here to help you! We offer services in additions, off-site building, and building in our current communities in Churchville and Greece, with more coming soon! Just fill out the form below to get started on making sure your home is perfect for you!
The post The Big Question: Should You Renovate or Move?, first appeared on the Keeping Current Matters website.
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