Crowded House: To renovate or buy bigger?

Outgrown your house? If your home office now has a cot next to the computer or you can’t bear another bunk bed, the next step is to stay and renovate, or buy something bigger for your brood. But how do you know which route to take?

Before you start packing boxes – or call in the builders – here’s what you need to consider:

If you’re leaning towards renovation – that is, adding an extension – start by consulting an architect as well as a builder. An architect will tell you outright whether your plans are feasible, and be able to suggest design alternatives to help you make the most of your space; an architect can also refer a good builder to provide you with a preliminary budget – so you know what you’re up against.

Know that many renovations run beyond the time anticipated for completion – where will you live while the renovations are taking place? Can you move back in with parents? Can you hole up in a section of the house and make do? Will you rent a property nearby? Can you afford to do the last, and are you willing to go through major disruption while pregnant or with kids in tow?

Be aware of the hidden costs of buying – use a home loan comparison calculator to identify what a new mortgage would cost you over the life of the loan, as this may be well beyond the cost of a renovation.

Will renovating be a good long-term decision? Adding to your home will solve your immediate problem of a space shortage, but consider whether your extension will add value to your home in the long run; also, it’s advised not to spend more than 25 per cent of your home’s value on a renovation.

If you have school-age children, are you prepared to remove them from their school if you relocate to another area? If you’ve established roots in your neighbourhood and you’re reluctant to put your family through the upheaval, renovating may be the right option for you.

If you do decide on renovations, consider a home loan redraw, where you pull out money from your mortgage. It’s a great way to get a loan at a low interest rate – the trick is to step up your repayments immediately to knock over the added debt, as the interest piles on if you leave it for 20 years.

And if you’re going for that new home, you might want to call in the experts to get yourself a new mortgage – talk to a Mozo home loan expert on 13 6696 or head here to compare home loans.