If your family has started to outgrow your current home or if you are looking for updated living space, it can be challenging to determine whether you want to remodel your home or move. Renovating can be exciting – you can customize your home exactly as you want. However, there are definitely drawbacks, such as concerns about the budget and uncertainty with the timeline, in addition to dealing with construction in your living space. And moving? It comes with its own set of hassles. When considering whether you should move or remodel your home, look at the pros and cons of each.
Home Remodeling vs. Moving: How to Make the Decision
Your decision on whether you want to remodel your home or search for a completely new house depends on a variety of factors. Price is one of the main concerns for most homeowners: is it more cost-effective to make improvements to your current home or list your property and find a whole new solution? Here’s what you should consider.
Should You Remodel Your Home?
Your current location may be perfect – the proximity to work, school, family, and friends may be hard to overcome. Or perhaps you have an emotional attachment to your current home. Regardless of the reason that draws you toward remodeling, it comes with benefits and drawbacks.
Benefits
It may increase the value of your current home: The expected return on investment for remodeling projects can range anywhere from 20 to 100 percent. In addition to making your home a more comfortable place in the short term, this can also increase your equity in the long term.
Renovation can be tailored to meet your family’s tastes and needs: Does your family value a large kitchen with a spacious island? Perhaps a drop zone with enough storage for several kids would make your daily routine easier. When remodeling your current home, you can focus on making changes that fit your unique needs and desires.
You can avoid the hassle, stress, and costs associated with listing your home and moving: Although moving may seem like the simplest solution, you still have to balance the logistics involved with listing and selling your current home while finding a new house and moving your belongings from point A to point B.
Drawbacks
Remodeling projects can be disruptive: While managing different parts of your renovation, you may have to reset how you function in your home. For example, you may find yourself without a fully functioning kitchen or bathroom for longer than you anticipated.
Risk of losing on your investment: While most projects add some value to your property, not all home renovations will recoup your costs. Even though you are likely to recover some costs on a new garage door (average ROI of 102.7 percent) or kitchen remodel (average ROI of 85.7 percent), other projects – like a bedroom remodel – may cost you more than you recover.
Your homeowners insurance might increase: New changes to your home could affect the amount of insurance needed to protect your home or belongings, which may lead to higher costs for your insurance policy to ensure that you have adequate coverage.
Should You Move?
You may have outgrown your home in more than one way, and you might need different needs or a different family structure when moving to a new home. The decision to move to a new house can make sense in many scenarios, but it poses significant challenges both practically and financially.
Benefits
Opportunity
To reassess and reimagine what you want and need: Moving means you can create a completely new wish list, which may include features that are not possible in your current home.
An opportunity to leverage your home equity: Property tends to appreciate in value over time, which means you may be able to benefit from your investment if you eventually sell it.
An opportunity to find a move-in ready home: Instead of going through a renovation process, you can look for a home that meets your needs now instead of living through months of renovations.
Disadvantages
Significant costs for preparing, listing, packing, closing, and moving: Listing and selling your home comes with a specific set of costs. Depending on the extent of your move, you may spend hundreds or thousands of dollars to transfer your belongings to the new place.
Your commitment to a new property may limit your financial options for the next few years: Moving tends to be financially viable only if you plan to stay in the new home for at least three to five years. This can be limited if you have other planned life changes.
Stress from searching for a new home: Finding a home that meets your wants and needs can be time-consuming and exhausting. What if you can’t find what you want within your budget? What if your home sells before you find a new place? The stress from a typical move can affect everything from your sleep patterns to your performance at work.
The impact of both redesigning and moving on your home insurance
Remodeling is likely to affect your home insurance premium because it influences the amount your insurance company may need to cover a claim if you need to file one. For example, if you renovate your backyard and install a swimming pool, it could mean a significant liability claim if someone were to fall and slip on the wet surface nearby.
Even renovations that don’t increase the risk of accidents in your home may require adjustments to your insurance coverage. Your renovation may increase the cost to rebuild your home after a covered loss, which means your insurance company will need to adjust your dwelling coverage amount to provide adequate coverage.
Similarly, if your renovation includes purchasing upscale appliances or new, more expensive furniture to complete the space, you may need to increase your personal property coverage levels.
During the renovation process, your property may face increased risks. If you need to store materials in your yard before they are installed, for example, you may need to protect them. Some home insurance companies offer a temporary add-on called construction risk insurance to help you provide the coverage you need during renovations. Your contractors should also have insurance. Make sure they are properly licensed and have their own insurance policy to protect you financially before they start their work.
Renovating a home typically affects the amount of insurance coverage the home needs. Save yourself potential future headaches – and even large out-of-pocket expenses – by considering your home insurance in your decision to renovate or sell.
If you feel that moving is the best option for you, you should know that there are implications for home insurance whether you renovate or move. Specifically, if you buy a new home, it is almost certain that you will need a new home insurance policy for it.
If you have a mortgage, your lender will likely require a home insurance policy as a condition of your financing. But even if you plan to pay for the new home in cash, you will probably want to buy coverage to protect your investment. This means obtaining insurance coverage when you own the new home and canceling the coverage on the old home if you sell it.
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Renovations That May Affect Your Home Insurance Bill
All of this is to say, remodeling your home doesn’t always mean that your home insurance costs will go up – although this can happen. The impact on insurance depends on several factors.
In general, if you plan to make changes that will increase your home’s value or the level of liability on your property, you should inform your insurance company. Failing to do so could leave you with inadequate coverage when you need it the most. In fact, it is recommended to notify your insurance company before starting any renovation project.
To give you a clearer idea of how renovations can affect your home insurance – and to help you decide whether to renovate or sell – it can be helpful to consider what specific renovations might entail.
Adding Space
When space is a concern, adding a home office extension or finishing a basement can bring a whole new level. But this also means you need to update your home insurance policy with the updated features and square footage of the house. These changes may increase your insurance premium due to the increased coverage amount on your dwelling.
However, updating your home insurance policy is worth it. No one wants to find themselves in a position where they spend money on renovations only to be devastated by a disaster that their insurance policy could cover.
Kitchen Renovation
If you have plans for a simple kitchen upgrade – such as replacing the backsplash or painting the cabinets – you might be able to skip contacting your insurance company. However, if you are going to invest a significant amount in renovating your kitchen, such as upgrading your countertops from laminate to granite or upgrading your cabinets to custom-built ones, ask whether your insurance policy needs to be updated. Since a kitchen renovation can make your home more expensive to repair or rebuild, you might need a higher level of dwelling insurance coverage once your new kitchen is complete.
Installing a Swimming Pool
Adding a swimming pool makes your home more hazardous to insure due to the likelihood of accidents occurring on your property. However, you may want to review the liability coverage and other structures included in your insurance policy after installation to ensure that your property coverage is adequate. And if you’re hesitating about whether you really want a pool, it’s a good idea to speak with your insurance company before making a decision.
Updating Electrical Wiring
The good news is that some renovations may actually lower your insurance costs. For example, if you update your electrical wiring to meet the latest building codes, this may mean less risk for your insurer in paying out a fire claim. Because of this, your home insurance costs might decrease if you’ve updated your electrical wiring to the latest standards. Updating old wiring, such as replacing lamp and conduit wiring, might make your home eligible for insurance with other insurance companies, giving you the opportunity to switch to a cheaper home insurance company if you desire.
Replacing the Roof
A new roof is a valuable addition, but it can help you save money on home insurance. In fact, this is one of the cases where you should definitely inform your insurance company. A new roof means better protection for your home, and this can lower your insurance policy costs.
Questions
Current Trends
Will insurance costs increase after renewal?
When you renovate your home, there is a good chance that your home insurance premium will change. Whether it increases or decreases will depend on the type of renovation. Generally, renovations that increase your home’s value (such as kitchen updates or adding space) and changes that increase risks (such as installing a swimming pool) will increase your insurance premium. On the other hand, updates that reduce risks – such as replacing the roof or updating electrical wiring – may lead to a decrease in cost.
Do I need insurance to renovate my home?
You might need it, especially if you are planning major renovations. Contact your insurance company to know your options. You may be able to add additional coverage to your existing insurance policy to provide financial protection during the project, or you may need to purchase a separate insurance policy to be in effect during the renovation.
Is it cheaper to renovate the house or move?
To compare the cost of renovation versus moving, you should consider the type of renovation you are planning and the cost of the new home that is ideal for you. You should also take into account specific costs such as a construction-related risk insurance policy to protect against major renovations or moving costs if you buy a new home. Calculate the numbers for your specific situation. To ensure you have as much information (and accurate information) as possible, you might want to contact your insurance company and ask for quotes for both scenarios: the cost of insuring your home after renovation and the cost of insurance for the new home you might buy.
Should my insurance company know about all renovations?
If your project is just a cosmetic renovation and will not affect your home’s value (such as painting walls or new window treatments), you may not need to inform your insurance company. However, failing to inform your insurance company about significant upgrades can be risky. If you file a claim after completing the upgrade, you may have to pay the difference out of pocket between the old coverage and the updated cost of repair or replacement.
Do my insurance company need to know about all renovations?
If your project is just a cosmetic renovation and will not affect your home’s value (such as painting walls or new window treatments), you may not need to inform your insurance company. However, failing to inform your insurance company about significant upgrades can be risky. If you file a claim after completing the upgrade, you may have to pay the difference out of pocket between the old coverage and the updated cost of repair or replacement.
Source: https://www.aol.com/remodel-move-consider-140005104.html
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