Should I move or renovate? What makes more financial sense

It’s a decision that many an Australian homeowner has had to make – should you sink the time and money into fixing up your home, or pull up stumps and move elsewhere? The answer could depend on your plans for the property, your financial situation, and the personal goals you want to achieve.

Why does your home no longer fit your needs? 

There are any number of reasons to consider renovating or moving out of your home. Just a few could include: 

• It’s too small: Perhaps your family has grown, or you’re sick of living on top of one another and just want some more space
• The location is no longer suitable: Perhaps you’ve changed jobs and your commute isn’t as convenient as it used to be. Or maybe you want to be closer to schools, shops, or other infrastructure.
• You want something new or different: Want to live in a house with a pool? Or a deck? Or solar energy?

What will it cost?

Renovating costs money – supplies, tools, trucks, appliances, hiring tradies and architects… it all adds up. Depending on the scale of the project, sometimes it may seem cheaper just to move house.

On the other hand, moving house isn’t free either, when you consider the cost of buying moving boxes and hiring trucks and movers. Also, moving house could have some extra expenses, such as stamp duty if you’re buying another property, and fees for real estate agents and solicitors/conveyancers if you’re selling your current property.

In both cases, you may be able to save a little money by doing it yourself, though the results may not be of the same standard if you don’t have the tools or training as a professional. And while you may spend less money, you could end up spending more time and effort on the project, which could seriously disrupt your home life. Also, remember that you may need to seek council approval before starting some major renovation projects, which may be an extra hassle.

Do you plan to sell or rent out your property?

Deciding to move out of your current home comes with another question: whether you plan to sell the property, or keep it as an investment and rent it out to tenants.

This decision may depend in part upon the property market in your area, and what kind of sale price you could expect to receive for your home, as this could affect your budget to purchase another property. You may also need to organise rental accommodation while you’re between houses, unless you can organise bridging finance.

Turning your owner-occupied home into an investment property may require refinancing your home loan, as renting your property out to tenants may not be covered under your current mortgage contract. You may also need to investigate what kind of rental returns you may be able to expect from your property, as this could affect your own household budget, whether you’re purchasing a second property to live in or “rentvesting” in another area.

In either case, keep in mind that before you move out, you may need to conduct some smaller renovations and repairs to prepare the property to appeal to potential buyers or tenants.

How will you pay for it?

If you haven’t managed to save up a sizable budget for moving or renovating a home, you may need to consider a few finance options.

If you’re staying put and renovating your owner-occupied property, you may be able to use your home loan to help pay for renovations. This could involve using your redraw facility to access any extra repayments you made in the past, or refinancing your home loan to access your equity. This could involve increasing your mortgage principal amount, or accessing a line of credit secured by your usable equity.

Another option could be to apply for a home improvement personal loan, which could help to keep your renovation budget separate from your mortgage for simplicity’s sake. This alternative source of finance could also be handy if you haven’t yet built up enough usable equity in the property.

Remember that while making renovations to a property can help to grow its value (especially if they add extra bedrooms, bathrooms, offices or living spaces), beware of overcapitalising. Consider doing some research on how much a project may cost and compare that to how much extra value it may add to your property before you start a project.

Compare home loans in Australia