Evaluating Housing Options: Move, Renovate, or Stay?

Evaluate interest rates and new home costs before deciding to move, buy, or renovate a property.

### Navigating the Housing Market: Move, Upgrade, or Renovate?
* 🏠  The current housing market presents a unique financial tension for homeowners, with **rising property values and interest rates** leading to difficult decisions about whether to **move, upgrade, or renovate**.
* 💰  Many homeowners are tempted by the **increased value of their properties**, but must carefully consider the **financial implications** of buying a new home in the current market.
* 📉  Interest rates play a crucial role in this decision, with even a small increase significantly impacting **purchasing power**. For example, a $2,000 monthly payment could afford a $470,000 house at a 3% interest rate, but only a $276,000 house at 7%.
* 🏡  The cost of the new home is another important variable, as homeowners must assess whether they can **afford a more expensive property** in the current market.
* 🔨  Renovating and upgrading the current home is becoming a popular alternative, with many homeowners choosing to **invest in improvements rather than moving**.
* 💼  Non-financial factors, such as **neighborhood quality, commute convenience, and school districts**, also play a **significant role** in this decision-making process.
* 📊  It's recommended to conduct a thorough analysis, potentially using a spreadsheet, to evaluate all **financial and non-financial factors** before making a decision.
* 📈  Resources like the "House Buying Hub" on money.com can help homeowners navigate this complex decision and ensure they make the **best choice for their financial situation**.

[Music] all right Bri let's talk about a fourth tug OFW Financial tension that exists and again we hear this one a lot too right now especially in this unique environment that we're in hey I our current house is not perfect so do I move do I go buy a new house or do I renovate and upgrade my current house how do I decide which is the best decision well I want to warn you about the Mirage that is sitting out there it's kind of a financial trap too is that a lot of people will have houses even if it was just a normal house that was $300 or $400,000 now that house in certain markets could be worth $7 $800,000 cuz we've had this huge runup and you're like wow look at all this money I have on my net worth statement right now I'm I'm rich in a lot of ways or maybe this is the time I should upgrade to that nicer house this is why say it's a trap

is that yes you have on paper a lot of net worth that has been built up because of this huge inflation period that we just went through. But what are you going to do? What do you if you move? First of all, you're going to walk away. We just had a stat that showed the Lion Share of mortgages are below 4%. Your new mortgage is going to be 7%. That's right. Also, if you go to upgrade your house, you're going to be. Yes, your house might be worth 700,000 now, but the upgrade house might be 900 to a million doll in certain markets. This thing is dangerous, so we better walk you through so you don't fall into a trap on something that seems on paper to be such a win-win, and you're like, Oh my gosh, there's a lot more going on here. Yeah, and this is one that there's not a definitive right answer for everyone. Personal finance is personal, so what you have to think through is how do I go about making this.

assessment, and frankly, this is probably going to be like a spreadsheet exercise. You're going to have to put pen to paper and figure out what makes the most sense for you. But what we can walk through are the variables to consider. Brian, you already hit on the first one. Interest rates matter. They are important. If you have a 2 and a half percent interest rate right now on your mortgage and you go to buy a house, even if you paid the exact same price for the exact same house but now you have a 7 percent mortgage, it is substantially more expensive. So you have to factor that into the equation. Yeah, we even look at this case study. This one blew my mind. We said, Hey, let's take into account somebody who's just got a $22,000 a month payment. You know, when interest rates were 3 percent for the mortgages, you could afford close to a $47,000 house. Sounds great, but let's now look at the rest of it. Now with interest rates being at 7 percent, that same

$2,000 only affords a $276,000 house same monthly payment. Yeah, and there's like I said the unfortunate thing. This is just looking at the interest rates. Sadly, we know that not only did interest rates go up, but housing purchase prices went way up as well, so the purchasing power plus what your payments go for, how far they go. They're we got, we got hit both ways. Yeah, you just said it. The second variable is the cost of new home. I mean, frankly, can you afford it if you bought a house for 300 and now it's worth 700? When you sell, if you have to go buy a $900,000 house, can you afford that? If you have to buy a million dollar house, is that inside the realm of affordability? Do you have enough cash to be able to keep it within 25% of your gross income? Do you have the down payment? You have to figure out just because you can move, just because in theory you can sell your house, just because it is a seller's market does

that means that it's actually what's best for your financial situation. You have to factor in what you're moving to. Well, and this is why we put another option in there. And I think this is where a lot of financial mutants are leaning in this direction. If you are with these higher interest rates, higher purchase prices, a lot of people are saying, looking at their house and they're looking at their current mortgage, they're saying, I think I'll just renovate. Yep, but look at the return on investment. And let me give you an experience here. The house behind me right now, they're finishing their basement. I mean, I could go home right now and I guarantee you it's loud because they got a whole crew out there. I didn't think to the house to the right of me. They have completely redone their back landscape plan in their yard where they put a hardscape. They screened in their back porch. And then over on the hill here is another and I'm like, Holy cow, it's like every house in my

neighborhood now look the houses are getting close to 10 years old so it makes sense that people are investing but I really can't help but think that people are looking at the return on investment that they could get. Plus, versus if they upgraded their landing on renovate versus move and so you have to look at the cost of that but there are also some other non-quantitative metrics you have to think about. I mean, is your current house in a neighborhood that you love? Do you have a really uh convenient commute for school or for work? Are you in the right School District? Does it satisfy the lifestyle needs that you have? Even though it's hard to put a dollar figure on those things, those things matter a ton so you want to make sure when you're deciding do I move to a new community, do I move to a new house, or do I just stay and renovate and upgrade and improve this house you factor in all of the financial metrics as well as all the non-financial metrics.

it's a big life decision that's going to affect you and your family for years and years and years and years to come, and that's why I would encourage you. I would we, we have, we, we always say stay within our, our understanding of what the house buying rules are, and this is something we, we share this on every one of our shows where we talk about the down payment, we talk about the 25%, but I think it can go beyond that. I would encourage you go to money.com resources, look at our house buying Hub because this is going to let you really put your numbers in, go through our checklist, and turn the personal finance personal towards you so you know all the things you have to deal with. Here's the thing: we're living in a unique economy right now, and there are a lot of financial decisions that create tension in our life. Hopefully we've given you the tools and the techniques and the things you need to know to be able to navigate those as well as you.

can if you've not been to our website go to moneyguide docomo resources there as well as all the different hubs and calculators so that you can hopefully do money better

Renovate Your Current Home or Buy a New One: Which Should You Prioritize?

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The Financial Trap of Upgrading Your Home

The current housing market's significant inflation may make it seem like a great time to upgrade, but it can actually be a financial trap.

Many people are lured by the increased net worth of their homes, but moving or upgrading can mean much higher mortgage rates and costs.

Ultimately, the decision to move, buy a new house, or renovate depends on individual circumstances and requires careful consideration.

Factors to Consider When Assessing Housing Affordability

Interest rates play a crucial role, as a higher rate can significantly increase the cost of a mortgage.

The rising housing purchase prices also impact affordability, as the increase in value may make it challenging for homeowners to afford a new property.

It's important to assess whether the potential new home is within a reasonable price range and if there are enough funds for a down payment and to maintain the housing expenses.

Deciding Between Moving and Renovating: A Financial and Non-Financial Consideration

Many people are now considering renovating their current homes instead of moving, due to higher interest rates and purchase prices in the housing market.

The decision to move or renovate is not only based on financial metrics like return on investment, but also non-quantifiable factors such as neighborhood, commute, school district, and lifestyle satisfaction.

It's important for individuals to carefully consider both the financial implications and non-financial aspects when deciding whether to move to a new house or renovate their current one.

It's crucial to understand house buying rules and make use of resources like the Money.

In the current unique economy, financial decisions can create tension, but having the right tools and techniques can help navigate them.

com offers various hubs and calculators to improve money management.