Should you build an addition or buy a new home?

My husband and I have lived in three different houses and renovated one of those houses. The decision to sell our first house rather than remodel was easy because we wanted something that house couldn’t offer – the charm and character of an older home.

Our second house was more than 100 years old, and we loved its 12-foot high ceilings, intricate woodwork and exposed brick in several of the rooms. But after we had our third child, we needed more bedrooms. Plus, there were other things that weren’t working for us. We debated renovating but chose to move, instead. It was a tough decision, but I think it was the right one at the time.

We’ve been in our third house for seven years and renovated part of it two years ago to add more functional space for our family of five. Both moving and renovating can be overwhelming. Most people, though, would choose the latter. Real estate marketplace Zillow® found that 76% of Americans would rather renovate if given a choice between spending money on a down payment for a new home or using that money to fix up their current home. 

“I think that speaks to how challenging it is to move,” says Amanda Pendleton, a lifestyle expert for Zillow. “A lot of people love their homes, they love their neighborhood. People generally don’t want to move if they don’t have to.”

But, sometimes, moving makes more sense than staying put and adding on to your house – as my husband and I discovered. If you’re trying to decide which option is the best, here are five questions to ask yourself.

What about your current home isn’t working for you?

When trying to decide whether to buy a new home or remodel, first ask yourself what it is about your current house that isn’t working for you, Pendleton says. Is it the size or the condition of the house? If so, consider renovating. But if it’s the location – perhaps your commute is too long, you want to be in a better school district or the neighborhood is no longer safe – then you should consider moving, she says.

You might also want to consider moving if you are facing a massive overhaul the mechanics of the home, says J. Pickens, host of HGTV™’s “The Work Around.” “By that, I mean ripping out the electric, replacing all the piping, black mold, infestations, etc. Not because those problems can’t be fixed, but because of the time and energy that can go into repairing them while you’re still living in the house.”

It might not be the house that’s not working for you but rather the size of your property. One of the key reasons my husband and I decided to sell our second house and move was because we wanted more room for our kids to run around outdoors and play. That house had a tiny lot and wasn’t on a safe street for biking.

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What can you afford?

Don’t assume that adding on will be cheaper than moving, or vice versa. Research both the cost to renovate a home in your area and the prices of homes that meet your criteria. You can get an estimate of how much the addition or renovation you want to make will cost by using sites like  HomeAdvisor®’s room remodeling cost calculator or™’s cost guides. You can find homes for sale on sites such as Zillow and®.

If the renovations you want to make will require you to move out of your house for a while, factor the cost of renting into the equation. Also, remember that you need to have extra money for emergencies or hidden costs that can arise during a renovation, Pickens says. “It’s never good to be all-in on any project.”

If you want to upgrade to a bigger house, don’t just consider the down payment you’ll need to make. You’ll likely have a bigger monthly mortgage payment. You don’t want your debt-to-income ratio to exceed 30%, Pendleton says. Plus, you likely have to spend some money to make cosmetic improvements to your current house to sell it, she says.

Will you get a return on your investment?

If you’re leaning toward renovating, ask yourself whether you want to do it to have a space that improves your quality of life or to get a return on your investment when you sell your home, Pendleton says. If you’re more concerned about the latter, then you should consider whether the type of addition or renovation you want to make is financially worthwhile.

“Some renovation projects are more cost efficient and give you more bang for your buck,” Pendleton says. For example, you can get $1.07 at resale for every dollar you put into a family room addition, she says. However, you’ll only get 48 cents on the dollar at resale for a basement renovation.

Even if you just want to renovate to have a space that makes you happier, you still need to have some financial realism, Pickens says. “Don’t put more money into a house than the house is worth or that you can afford to spend and pay back,” he says.

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Would you be overbuilding?

You also need to consider whether the additions you want to make to your house will make your house the largest in your neighborhood. That could make it difficult to sell. “If you are trying to flip, knowing the going rate for houses in the neighborhood is a must, as the deviation from the mean home value point can only go so far no matter how much money you pump into it,” Pickens says.

Also, think about whether adding on to your house will impact your relationship with your neighbors. “In the words of my father, ‘Keep harmony with thy neighbors. They may be with you for life,’” Pickens says. You might be better off moving if the additions you make will upset your neighbors or will price your house out of the market in your neighborhood.

Do you want to deal with a lengthy renovation?

“Financing is a major concern, but you do have to think about the value of your time and energy,” Pendelton says. In other words, even if you can afford to do the renovations you want, ask yourself whether you’re OK living in a construction zone for several months.

It took about six months for contractors to remodel my daughters’ bathroom, a bedroom and a TV room and to convert a screened-in porch into a room. Basically, an entire floor of our house was being renovated. During that time, one of my daughters slept in our guest room and the other shared a bedroom with her younger brother (an experience she still complains about).

That said, selling a house and moving can take just as long – or longer. Plus, you have to deal with the uncertainty of not knowing when it will sell and how much it will sell for, Pendelton says.

Take your time to decide

Because so many emotions can be attached to a home, asking these objective questions can help make the decision whether to remodel or move a little easier. “It is a big decision for sure, but don’t get overwhelmed,” Pickens says. Just make sure you take your time to weigh all the pros and cons of each option.

Most importantly, remember that home truly is where the heart is. “It’s where you live your life, so think about what will maximize your happiness,” Pickens says.

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Cameron Huddleston is the author of Mom and Dad, We Need to Talk: How to Have Essential Conversations With Your Parents About Their Finances. She also is an award-winning journalist who has been writing about personal finance for more than 17 years. You can learn more about her at Opinions are those of the author or the person interviewed.

Haven Life Insurance Agency offers this as educational information only. Haven Life does not endorse the companies or offer the products, services and/or strategies discussed here.

Zillow is a registered trademark of Zillow Inc.

HGTV is a trademark of Scripps Networks, LLC.

HomeAdvisor is a registered trademark of HomeAdvisor Inc.

FIXR is a trademark of True Brands Limited. is a registered trademark of the National Association of Realtors.

Real Rate is based on your application and third party data obtained during underwriting.

Haven Term is a Term Life Insurance Policy (DTC 042017 [OK1] and ICC17DTC in certain states, including NC) issued by Massachusetts Mutual Life Insurance Company (MassMutual), Springfield, MA 01111-0001 and offered exclusively through Haven Life Insurance Agency, LLC. Policy and rider form numbers and features may vary by state and may not be available in all states. In NY, Haven Term is DTC-NY 1017. In CA, Haven Term is DTC-CA 042017. Our Agency license number in California is OK71922 and in Arkansas, 100139527.

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