Outgrowing Your Home: Should You Upgrade or Renovate?
Outgrowing Your Home: Should You Upgrade or Renovate? As families grow, lifestyles change, or space becomes limited, many homeowners find themselves outgrowing their home and asking, “Should I upgrade or renovate?” Both options have financial implications, and understanding the pros and cons from a finance perspective can help you make the best choice for your situation.
Buying a Bigger Home: Pros & Cons
Pros:
More Space Immediately – Purchasing a larger home means you get the additional space straight away, without the disruptions of a renovation.
Potentially Better Location – Moving gives you the chance to upgrade your location, whether that’s closer to schools, work, or lifestyle amenities.
Fixed Costs – Once you’ve bought your new home, there are no unexpected renovation costs or budget blowouts to worry about.
Higher Long-Term Value – A bigger home in a sought-after area may have stronger long-term capital growth.
Cons:
Higher Costs Upfront – Purchasing a bigger home involves significant costs, including stamp duty, legal fees, agent commissions, and moving expenses.
Increased Mortgage Payments – If you’re upgrading, you may need a larger loan, meaning higher repayments.
Market Conditions – If you’re buying in a strong market, you may pay a premium and be subject to rising interest rates.
Emotional Toll of Moving – Uprooting your family, changing schools, and adjusting to a new community can be stressful.
Staying and Renovating: Pros & Cons
Pros:
Cost-Effective (In Some Cases) – Renovating can be more affordable than buying a new home, especially when avoiding stamp duty and other buying costs.
Stay in a Familiar Location – You get to keep your community, school catchment, and local conveniences.
Increase Property Value – A well-planned renovation can boost your home’s value and make it more appealing for future buyers.
Customisation – Renovating allows you to design your space exactly how you want it, rather than compromising on a new home’s layout.
Cons:
Unexpected Costs – Renovation budgets often blow out due to unforeseen expenses, such as structural issues or council approvals.
Disruptions – Living through a renovation can be inconvenient and stressful, especially for larger projects.
Limited Return on Investment – If your home is already at the top end of value for your suburb, overcapitalising could make it harder to recoup your renovation costs when selling.
Financing Challenges – Unlike a straightforward mortgage, financing a renovation often requires construction loans or equity redraws, which can be complex.
Financing Your Decision
Upgrading Your Home:
If you’re planning to buy a bigger home, you’ll need to consider:
- How much equity you have in your current property
- Your borrowing capacity and potential mortgage repayments. To learn more about what you can borrow, click here
- The total costs involved, including stamp duty and moving expenses
- Whether you should sell your current home first or buy before selling
Financing a Renovation:
If you choose to renovate, your financing options may include:
- Using Existing Home Equity – If you have enough equity, you might be able to refinance your loan to fund the renovation.
- Construction Loans – These provide funding in stages as the renovation progresses.
- Personal Loans or Credit – While an option, they tend to have higher interest rates and should be carefully considered.
Which Option Is Right for You?
There’s no one-size-fits-all answer. The right decision depends on your financial position, lifestyle needs, and long-term goals.
If your home no longer meets your needs but you love your location, a well-planned renovation could be the answer. If your space limitations are significant or you’re looking for a fresh start in a new area, upgrading may be the better option. If you are outgrowing your home, it’s important to ask yourself, “Should I upgrade or renovate?” and weigh up the financial implications of both choices.
At Bayland Finance, we can help you explore your financing options, whether you’re looking to buy a bigger home or fund a renovation. Get in touch with our team to discuss the best solution for you.
