Front Page Love It or List It?
Considering the pros and cons of moving to your dream home versus a refinance and remodel? A local expert offers tips to make the most of your money.
Do I refinance, or do I move? Should I stay or should I go? Love it or list it? If you’ve had these questions running through your mind lately, Cincinnati-based Ron Erdmann at Guaranteed Rate shares some expert tips.
Erdmann says the first step is to dream. “Dream of what your ideal home looks like. How many bedrooms and baths? How much land is it on? How many cars in the garage? What does your kitchen look like? Dream up everything you wish it had,” he explains. “Look at current listings, or look into custom home options. Now, just for fun, no strings attached, look at what your payment would be for that dream house.”
Erdmann says to seek the help of a highly qualified mortgage professional, not a simple mortgage calculator online, to determine what your monthly payment would be. “They’ll look at your mortgage, PMI if applicable, property tax, house insurance, monthly housing cost, etc,” Erdmann adds. “Once you know what payment looks like, then look at your finances to see if you can afford it or not.”
Then, he says, compare that to your current house payment. Taking it a step further, consider what your payment would be with a refinance.
“I often start the pre-approval process for someone looking to move and then it turns into a discussion about refinance instead because of how much they can lower their interest and payments,” Erdmann says. “People are realizing how inexpensive money is right now and questioning if they should just take advantage of the low interest to make their current home one that checks all the boxes.”
It’s not uncommon, Erdmann says, that lowering your interest rate with a refinance allows for a renovation while keeping your monthly payments the same. “As you take advantage of low rates, you make room in your budget for that dream renovation you didn’t think you could afford right now,” he explains.
Erdmann does have some advice to consider before jumping on the refinance and remodel bandwagon. “When you look at the refinance, be realistic about the condition to your house,” he says. “If you know you’re going to have to put a lot of money into the house with all new kitchens and baths in the next 10 years, take that into consideration. You may be better off buying the house now that checks all the boxes.”
Also, Erdmann says, people tend to undervalue what their currently house is worth in the current market. “It doesn’t matter what you paid for it,” he explains, “it matters what you could sell it for in the market. Talk to a real estate professional about what your house is worth.”
Something else to consider, Erdmann says, is which renovations you’ll eventually need to do before selling your home down the road. “Don’t put off the renovations to your house you know you’ll need to do,” he urges. “If you can do them now, you’ll actually get to enjoy them before you go to sell later.”
Lastly, Erdmann says, be realistic about the cost of improvements. “Homeowners should always plan a contingency budget for any project,” he explains. “The National Association of the Remodeling Industry suggests a contingency fund that matches 10 percent of the total budget in case something goes wrong, such as a contractor opening up a wall to find termites or water damage from a leaky pipe.”