The process of deciding between a custom built home and renovating a home may be straightforward, or it could take time and some analysis before you reach a decision. Factors that influence the direction you take could include limits on how you use your existing property and how fast you need the additional space or home improvements.
Learning Your Limits
There are three agencies that could have restrictions on what you do on your lot. The first is the jurisdiction in which you live. Local governments usually have zoning restrictions regarding what you can do on your lot that might include a complete teardown of the existing property to build a custom home. They might not allow you to add to your home because of setback requirements or easements.
Homeowners associations (HOA) are another legal entity that have the right to restrict what you do on your lot, from tearing the property down to making changes to its footprint. If your lot is in a community controlled by an HOA, you’ll need to submit your plans to them first for approval.
The lender may take a dim view of tearing down the property since it’s part of their collateral for the mortgage loan. They may prefer that you sell the home instead of demolishing it and build a new home on a different lot.
Besides the constraints that the city, lender and HOA may have, your current home may not be worth the investment. If it has substantial defects that aren’t covered by insurance, it may cost more to overcome them than you’ll see in appreciation.
Financing Considerations
If you tear down your existing home for a custom built home, you’ll lose the ability to cash out your equity to put toward the new home. A high-interest rate environment also makes it challenging to sell your existing home and build new.
Many people turn to home renovations during periods when mortgage rates are creeping up. They finance all or part of the improvements with a home equity line of credit (HELOC) or an improvement loan, especially if the upgrades involve energy efficiency improvements.
What’s Best for You
Once you’ve identified the restrictions, if any, that you’ll face, consider the advantages and disadvantages of remodeling versus a custom built home. You won’t have to move if you choose to remodel and the job will get done faster. When you build a new home, you can specify everything about it from the basement up. Depending on how big of a project you are considering, a custom build might actually be cheaper. You may be able to stay in your current home while the new home is being constructed.
Bottom Line
Whether you renovate your home or go forward with a custom built home might be a matter decided by legal considerations or housing market conditions. If neither the law or market will influence your decision, which is better might be a matter of how extensive you want to change your home or your need for change. Alair Homes is here to help walk you through the steps involved in making this decision. Contact us to discuss your goals and get the information you need to make the right choice.