Deciding whether it’s better to move ahead with a custom built home or undertake a home renovation may require some research on your part. Either decision may depend on forces out of your control, or it could be simply a matter of discovering your fundamental preferences.
The Market
The strongest indicator of the health of the housing market is the interest rate available for prime mortgages. New home and existing home sales slow as the mortgage interest rates rise. When the rates are low or are stable, the housing market thrives. Most people sell their existing home in order to go forward with a custom built home, since they want to use the equity as a down payment or as security for a construction loan. When rates are high, it will be harder to find buyers. Home improvement retailers have found that rising interest rates increase their sales of building materials and supplies, not for new construction but for home remodeling projects.
The Rules
People who choose to tear down their existing homes and build a new custom built home on the lot sidestep the need to sell their home. This strategy offers some advantages, especially if the neighborhood is convenient to work and the other places you frequent. There are, however, some real challenges to tearing down and building new, like:
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- Your lender (if you have a mortgage). When you tear down the existing home, the lender will lose some of the collateral of the mortgage. Not all lenders allow a complete demolition.
- The city. Some municipalities don’t permit a complete teardown. Before proceeding, contact the building department of your local jurisdiction to learn their policies.
- The HOA. A homeowner’s association may not let you tear down your home and build new. Be sure you check with them before proceeding. They may also have strict guidelines for remodeling, as well, especially if it involves a home addition.
- Finding temporary housing. If your current home is torn down, it will be necessary to relocate your family temporarily during demolition and while the new home is built.
New Home Advantages
There are plenty of advantages that a custom built home gives you. It will be exactly as you want – you pick the floorplan, upgrades, number of rooms and even the placement of things like windows and doors – and everything will be new. The home and all its components will have a warranty whose length depends on the builder and the manufacturers. The house will likely be energy efficient since it will be built to stricter building codes for insulation installation and air infiltration.
Home Renovation Advantages
Some people renovate rather than move forward with a custom built home because they don’t want to leave the neighborhood for a variety of reasons. Depending on why they need to make a change, adding a home addition, expanding the garage, renovating the kitchen or adding a new bathroom may be the best choice. They fund the project by tapping into their home’s equity or applying for grants or rebates available for home energy improvements, like increased insulation, air sealing and new HVAC equipment. While this option is worth considering, it’s important to also consider the financial investment for the renovation versus the cost to build new. Depending on the extent of the renovation and the need for things like structural repairs or making changes to load bearing walls, building new may still be the better option.
Bottom Line
Forces out of your control may dictate whether you choose a custom built home or a home renovation. If both choices are available, which you choose could be a matter of personal preference or the ability to finance. Alair Homes is here to help. We build beautiful custom homes and can help you with your renovation needs too. Contact us to discuss your goals and to develop a plan that leads to success in reaching them.