Most homebuyers end up spending lots of time and energy either searching for or designing “the perfect home” before signing any contracts or laying down funds.
Location, price, market trends, property taxes, homeowners association fees, and the condition of the property are usually factored into a house hunt. Also, each buyer typically has a wish list that includes specific needs (the things the buyer has to have) and wants (the features the buyer would like but could do without if necessary).
While the home-buying process involves several important choices, one of the very first decisions buyers need to make is whether to shop for an existing home or build a new one.
Renovating your home could be just the thing you need to make it truly yours. But be careful: This decision could lead you down a never-ending (and stealthily expensive) home improvement rabbit hole. Once you’ve turned your kitchen from drab to fab, for example, your family room now seems out of place, the living room looks dated, and so on. In many cases, tearing down an old home is more affordable than a top-to-bottom remodel, with or without addition. But not always. It depends on the home, your location, and your situation. Here are five factors to consider when weighing your options, plus advice on how to make this costly financial decision.
Looking for home renovations Melbourne? Look no further! Hitch Property Constructions has you covered.
Remodelling Vs Building New: What Do You Want Most?
When deciding on building new or remodelling, you first need to know what’s most important to you and what type of home you want. Ask yourself what you dislike about your existing home and why you’re considering a change.
A family that’s growing and a family where the kids have left the nest for goodwill likely need two very different homes. It may be more important to add on new bedrooms or to turn small, unused rooms into a larger space for entertaining. Sometimes people want to achieve a certain goal, like having room for a hot tub or adding large bay windows to take advantage of a great view.
Knowing what you want can give you a good point to determine what you might need, such as completely new construction, and it can help you prioritize your timeframe, budget and more.
Remodelling a House Vs Building New: Interest Rates and Equity
The starry-eyed among us often focus on the amazing new possibilities that a new or remodelled home could provide. We imagine parties in the expanded dining room or plan what colour to paint the new nursery. The ethereal details help us frame our desires, but there’s also a strong need for firm financial footing in the real world.
Many mortgages include clauses that address whether or not you can tear down your home, freeing up land for a rebuild. Sometimes stipulations are placed on how soon the rebuilding process must begin. Sometimes lenders ask to be included in the planning process. And sometimes your mortgage may forbid demolishing your home.
The main reason behind this is that you’re destroying the security the bank or lender has for your loan. Demolishing your home can also negatively affect your equity in a significant way. You can quickly dip into negative equity, which may prevent you from using a home equity loan product. When your home is demolished, and a new one is built in its place, you’re responsible for the cost of construction, and you must eat some of the lost value when you lose equity in the building that is gone.
To address this, you may need a new mortgage or a line of credit that operates along the same lines of a mortgage. You’ll need some collateral, which is typically the new or renovated home, and often you’ll need to bring some of your cash to the table.
Take your time with these financial decisions and look at your options available, including FHA and traditional loans with 15-year, 30-year, fixed and variable rates. To start the new home process, you should obtain a prequalification or preapproval from your chosen lender for a mortgage.
When considering these financial products, you should shop around to find the best interest rates, repayment terms and fee schedules. Some lenders may offer you advantages such as no origination fees or early repayment penalties, which can make a big difference in the amount you’ll pay throughout the life of the loan.
It’s often easier to get a loan if you know how much value your new build or remodel will create. To increase your home’s value, you should consider fibreglass insulation, door replacements, and minor kitchen remodels.
Always discuss your financing options with a professional. The Internet doesn’t always provide correct information or the latest loan APRs, so you may find a better deal by working with someone directly.
Remodelling Vs Building New: Going Green
How green you want to be can also help you make a decision about remodelling a house vs building a new home.
Remodelling your home provides you with access to some innovations in the eco-friendly space, such as windows, siding and appliances. However, you won’t be able to make any structural changes, such as replacing whole-home ventilation with a more efficient HVAC system.
Building a new home gives you the opportunity to make greener choices. You can ensure every wall has high-efficiency insulation, and those water-saving fixtures are used. You can downsize to reduce your overall impact.
Check out our range of Melbourne home renovations for your dream house.
With a simple remodel, it can be hard to:
- Free up enough roof and outside space to make a significant switch to solar power
- Use roofing materials that naturally cool your home, such as a “living roof” that allows plants to grow, catches rainwater, filters the water and provides insulation for your home
- Take advantage of other natural alternative power sources, such as geothermal power for your HVAC
- Incorporate systems that collect and filter rainwater for home use
- Ensure your home is tightly sealed; remodelling can create new concerns or exacerbate existing leaks in areas that were not remodelled
- It may seem like it is cheaper to remodel instead of building new, but some eco-friendly additions and renovations will deliver long-term savings on your energy bills. You’ll also reduce your environmental impact, put a higher reliance on recycled materials and have a more sustainable lifestyle, all of which have a significant non-monetary value.
Remodel Vs New Construction: What’s Your Time Frame?
Homeowners deciding on remodel vs new construction should determine how long they can afford to be away from their home while the process happens. Remodelling and building both require time and disruption of your everyday life. Let’s examine possible timeframes for remodels and new construction:
Depending on your situation, you might be able to use much of your home during the remodelling process. If you plan appropriately, you can limit the remodel to a few rooms and perform tasks in a certain order. Remodelling can take one week to nearly 10 weeks based on the project. The longest projects tend to be large room changes, such as converting a bedroom to an attic. Thankfully, large room changes tend to create minimal disruption.
A bathroom renovation or refinishing hardwood floors are typically the most disruptive, but they take about two weeks. During this type of remodelling, you have to avoid large areas of your home. You’ll experience interruptions like shutting off the water, and you’ll need to be completely out of the house while fumes from some floor finishing solutions dissipate.
It’s typically easy to manage to live in your home during an exterior remodel. For siding and roof replacements, you probably won’t need to move out, and the biggest distraction is noise. The remodel will likely occur during regular work hours.
The unfortunate side of things is that your home may require multiple projects in order to complete a full remodel, and many of these cannot happen at the same time. Sometimes long strings of renovations and remodels take more time than a new home construction would.
Building a new home usually takes longer, and you’ll have to find another place to stay while the construction happens. A completely new home takes about six months from demolition to the finishing touches. There are options you can choose to save time if you choose a modular build, but going the other direction with a completely custom-designed and custom-built home can greatly extend the timeframe.
With our long history of new home construction, we’ve identified a few key factors that impact the length of time it will take to complete your new home:
- The size of the home you want
- What type of home you want, including overall design and floors
- Custom design options and overall complexity
- Design changes — most people want to maximize good views and sunlight
- Builders you choose and their team of subcontractors
- Your city and county building and licensing departments
- The weather throughout your project
- Unexpected weather events, which can delay construction or make building materials in your area scarce
There are many working pieces for any new home construction, and they’re significantly more involved than most home remodels. That means if time is short, a remodel will win out in consideration of: should I remodel my house or buy a new one? At Hitch Property Constructions, we offer a wide range of home renovations.
How Long Will You Stay in Your Home?
If you plan to be in the house for the long-term and then sell it, it is usually wiser to tear down and rebuild, at least from a purely financial perspective.
Physical elements of a home are on a timer. The minute the hammer strikes your house for the last time, that timer starts ticking. Exterior paint might last up to seven years, but more like five years in inclement climates. Dishwashers last less than a decade, central air conditioners last about 10 to 15 years, and three-tab composite shingles are good for about 20 years.
On top of that, while some elements’ lifespans are staggered, many others expire at roughly the same time. In terms of cost, replacing a dishwasher is nobody’s idea of fun, but just imagine having to do that in the same calendar year that you replaced your roof, gutters, and central air conditioner.
By rebuilding, you reset the clock in terms of the house’s physical nature: everything from the appliances to the house’s envelope (e.g., roofing, siding, etc.). When it comes time to sell 15 years later, you’re selling a 15-year-old house instead of one that is 40 years old. As a bonus, you had the pleasure of living in a new house during those 15 years. Buyers are intimately attuned to the age of houses—if they aren’t, their real estate agent and house inspector will make them well aware of this fact.
How Much Do You Want to Spend?
If you’re tight on money, remodelling is always the way to go. The issue is scale—your ability to scale your spending up or down (or freeze it), according to your needs and resources. For example, you can start by remodelling a bathroom then move onto other rooms as your budget and time allow.
Alternatively, the teardown and rebuild option is all-or-nothing. After your first big purchase—the demolition—you’re left with a vacant lot, committing you to build the new home. Unless you want to be the owner of a vacant lot, you must keep moving forward. The worst thing is to have a house that is partially complete because structures left exposed to the elements age quickly.
Choose Between Better or Cheaper
If you want better, tear down and rebuild. If you want cheaper, remodel. Even a wide-ranging whole-house remodel will still be cheaper than tearing down and building anew.
According to Roger Greenwald, RA, AIA, “the cost of tearing down and rebuilding will be about 20 per cent higher than engaging in an extensive whole-house remodel. But the architectural benefits of tearing down and working with a clean slate can be huge: Better fundamental architectural design, all new systems, clean circulation, high-quality windows, new and efficient heating and cooling systems, tall ceilings, and space designed for your personal living patterns placed where you need it.”
Determine the True Condition of the House
While all houses can be remodelled, not all houses should be. Industry professionals generally agree that the following conditions merit a teardown/rebuild, or at least swing the argument further in that direction:
Desired improvements cannot be contained within the existing house footprint. Thus, you want an addition. The need for additional space is certainly not the only reason for building anew; additions get built all the time. The issue is that it happens in conjunction with extensive, expensive remodels of the existing house—a double draw on your funding.
The foundation is harmful and requires a lot of work before the house can be remodelled.
Are ceilings too low for your liking? It’s no simple matter to raise a ceiling—unless there is plenty of empty space up there. The floor above must be removed and then rebuilt.
Be Aware of Zoning Restrictions
Zoning laws govern the type, size, and location of buildings on any property. In urban and many suburban areas, home rebuilds often are restricted to the footprint of the original house. In other words, you can’t tear down a small house and put up a mansion. Zoning laws also may restrict the height of a new house, so you may be limited to not only the old footprint but also to a one- or two-story structure. Additionally, laws may not allow rental properties in many zones. If you’d like to build an addition or carriage house to use for renters, this may not be allowed.
When should I consider REMODELING instead of rebuilding?
If you already own a home with potential in a neighbourhood you like and would rather invest money in your home rather than in closing/moving costs. Suppose there are no available building lots in your desired neighbourhood. If property values are rising or home value is not at its peak.
When should I consider REBUILDING instead of remodelling?
If the cost of remodelling your home would outweigh the resale value or if building lots are available in your desired neighbourhood.
Which would cost less remodelling or rebuilding?
Overall, remodelling will cost you less than starting from scratch.
Which is more environmentally friendly?
Building from scratch allows more control over energy consumption and newer buildings built with energy efficiency in mind to reduce energy costs in the long run.
Determining if it is cheaper to remodel or build new may come down to how long you want to live in your home after the project is completed.
Remodels often provide the biggest short-term gain because they make improvements usually against existing equity, with a focus on immediate returns. New construction can be more difficult to finance, and you have a bigger expense to pay off, so an increase in your home’s worth takes longer to become advantageous.
In the simplest of terms, remodels are often the better choice for homeowners who will not stay in the home for more than seven years but who want to enjoy the time they have left in the home. Since gains are largest in the short term, remodelling often gives you the biggest bang for your buck if you’re selling soon.
When you want to build new, which is not cheaper than your remodel option, you’ll see a better lifetime value if you’re not planning to move. You get more enjoyment out of what you pay for and don’t have to focus on immediately recouping your money and equity. Most people save money with the cost of a single construction event instead of paying for multiple, individual remodelling projects over a longer period.
A new home will often have a higher value. If the housing market in your area takes off, you can capitalize and likely make a good profit. When selling, you can also look at adjustable-rate mortgage refinancing that will give you a bigger bang, essentially by reducing your mortgage payments while your home is on the market.
Even if you begin your home search set on finding the perfect existing property, you may end up deciding to build to get exactly what you want. Conversely, you may plan on building and later decide an existing home is a better fit. In either case, working with a qualified and experienced professional—whether that’s a real estate agent or a general contractor—can help ensure the process goes as smoothly as possible.