It’s common to hit a point in your life where you need more space. This could be a result of an expanding family, a change in living situation or financial situation. When that time does come, you’ll probably wonder whether you should renovate or move.
In this article we’re going to focus on two of these options: renovating your existing home or building a brand new home.
We will be looking at the following factors:
How long it will take
How location impacts this decision
Style, design and features
Cost To Build a New Home
If you are building a new house you have two options; a stock model offered by a builder or a custom home.
The trade off here is straight forward. A custom home will generally be more expensive and take longer than a cookie-cutter build. The upside is that you have more control over every design detail and feature that’s included with your new house.
According to WOWA.ca the average cookie-cutter home in Vancouver cost $260/sq ft to build (1). Keep in mind that this article was likely published pre-pandemic and anecdotally we’ve heard that number is as high as $300+ per sq ft depending on the total size of the house.
A custom house generally will cost 2 or 3 times that price. That said, there really is no upper limit on a custom home. If you have an indoor pool with a water fall feature custom tile hand painted from Italy and a helicopter landing pad the home could cost thousands of dollars per square foot.
Depending on where you live, you also need to factor in the cost of land. In March, 2022 a there were several lots for sale ranging from $1.5-2.0m+ depending on the location and size.
If you already own a home in the area, some of the cost may be offset by selling your existing home. However selling a property has additional costs including Realtor fees, closing fees and property transfer fees.
These fees may take a chunk out of the down payment for your next home.
Cost of Renovating a Home
The cost to renovate a home will vary greatly depending on the scope of work, finishes and the area you live in.
If you are performing cosmetic changes, that will be cheaper than if you’re changing the layout of house, adding an addition or completing a full remodel.
The costs will also vary depending on which rooms you’re renovating.
Painting a few rooms and replacing the carpet may only cost $100/sq ft while renovating a kitchen can easily cost $500/sq ft.
It costs between $150-$300 per sq ft. to renovate an entire home where renovating a kitchen will cost between $250-$500/sq ft.
$50,000 - $100,000
Basic cosmetic changes. Painting, trim and baseboards, flooring, refinishing cabinetry, appliances, and countertops.
Remodeling Several Rooms
Full bathroom(s) or kitchen remodel, painting, new flooring, light fixtures, windows.
Full Home Renovation
$250,000 - $600,000
Full home remodel. Kitchen, bathrooms, flooring through out, painting, new cabinetry and closets. Layout changes or additions.
Financing Options: Building a New House and Renovating a Home
Financing: Renovating Your Existing Home
HELOC: If you are renovating an existing home you may want to consider a HELOC or home equity line of credit. A home equity line of credit allows you to borrow against the existing equity that you’ve built up in your house.
These loans tend to be slightly higher than standard mortgage loans.
Cash-Out Refinance Loan: A cash-out finance loan means you re-finance your existing mortgage to increase the loan amount. This allows you to use this additional loan amount to finance a renovation. Keep in mind if you do it before your mortgage term is up you may be subject to steep penalties.
Purchase Plus Improvements: While this doesn’t technically fall under the category of renovating your existing home it’s worth discussing a purchase plus improvement loan.
A purchase plus improvement mortgage allows you to include the cost of renovations in your monthly payment. Allowing you to renovate today and roll the cost into your mortgage.
Financing: New Construction
Construction Mortgages: Construction mortgages are unique in that you don’t receive the full loan value on day 1. Construction mortgages are setup so you receive installment payments that allow you to pay for the land and then subsequently pay contractors.
Typically lenders will provide 75% of the value of the house. This means that you will be required to have 25% of the total loan value in cash.
If you already own your home and you have built up equity in it, renovating your home can be financed entirely through a HELOC without putting any money down.
How Long Does It Take To Build a New House
According to Census data (2), in 2021 the average time for a built for sale house is 6.7 months and the average time a contractor built house is 12.6 months.
It’s important to note these are from “start times” and they don’t distinguish between cookie-cutter houses and custom homes. Those 12.6 months don’t include design which can often take several months or more depending on the complexity.
This data is also from the US, where the ground doesn’t freeze and it’s warm enough in most parts of the country to pour concrete year round.
Anecdotally, my neighbor is building a new home and It’s going to take more then 2 years from when they bought the lot to move in.
How Long Does It Take To Renovate a Home?
This is a little bit more complicated to answer than a new home build. There are a lot fewer variables when we’re looking at a new build versus renovating an existing home.
Similar to our pricing table we’re going to break this down into three categories: cosmetic, remodeling several rooms and a full home remodel. Some things that will create longer lead times are design and permits.
Basic cosmetic changes. Painting, landscaping, trim and baseboards, flooring, stock cabinetry, appliances, and countertops.
Remodelling Several Rooms
Full bathroom or kitchen remodel, new flooring, painting, appliances.
Full Home Remodel
Full home remodel. Kitchen, bathrooms, new paint through out, appliances, new cabinetry, layout changes, additions.
How Location Can Impact This Decision
If you are selling a home in North Vancouver and wanting to stay in that area, renovating can be cheaper than moving. This is particularly true for expensive areas such as North Vancouver. Doubly so, because of the property transfer tax.
Let’s look at a real example. This lovely, but dated 2000 sq ft. home in North Vancouver is selling for $1,999,000 let’s assume the mortgage is $1,499,000 on it and the owner has $500,000 in equity.
Photo Credit: Karen Ericson
This home in North Vancouver is listed for $2,288,000. Let’s assume you have to pay full price in today’s market (March, 2022).
Photo Credit: Marco Pontillo
So you sell your home for $1,999,000 and buy the new house for 2,288,000. It’s been your primary residence so you don’t have to pay capital gains on it.
To sell your home it’s going to cost you the following in realtor fees:
To buy your new home it’s going to cost you property transfer taxes:
The proceeds of the sale of your house:
$1,999,000 - $1,499,000 = $500,000 – Realtor Fees ($56,000) – Property Transfer Taxes ($47,000) = $397,000
Your new down payment = $2,288,000 x 20% = $457,600. Your new mortgage is = $1,830,400 And you’ve had to spend an additional $60,600 to put down 20%.
What if took that put into a renovation instead?
Your existing home is worth $1,999,000 and you use a HELOC to finance $391,000 in renovations. Assuming you get 70% of every dollar you put in back in equity your home is now beautifully renovated, it’s worth ~$2,272,700, you didn’t need to move and you didn’t need to finance $60,600 with your own cash.
Style, Design and Features
With a new home, particularly a custom built home you have more choices. You get to fully spec out the house to your exact style. The same can be said for features, some features are easier to build when you’re starting from scratch.
In some respects with a renovation there are limitations. You have to consider the existing footprint of the building, existing structural, electrical and HVAC. Often times these can be moved but in some cases there isn’t a great solution.
People do tend to underestimate what a dramatic change a full home renovation can have. Most of our clients are surprised at the end of the project how amazing their “new”
Is renovating and remodeling the same thing?
While the terms are often used interchangeably. Depending on where you are in the world, renovation is often considered a smaller, less intrusive improvement to an existing space. While remodeling tends to repurposing a space, moving walls, changing floors plans etc.
What building permits are required for a renovation?
A building permit is a legal document signed by the City that outlines all of your projects permitted construction details. The City is responsible for ensuring that you follow all zoning, building code, safety, sustainability, livability, and accessibility legislation. The timeline varies depending on the district you're applying to and the scope of your project. It could take anywhere from 2 to 8 months for one- and two-family home repairs and additions. Permits will generally take much less time if the project is small, such as a bathroom or kitchen renovation.
Should you renovate your home all at once or in stages?
It is normally recommended that you renovate your entire home at once if you can afford it. While the upfront cost is more than upgrading one room at a time, the overall cost is substantially lower. Because it is efficient - full-home renovations cost less in the long term.
Is renovating better for the environment than new construction?
It is better for the environment to renovate. Demoing a house results in a ton of scrap material headed to the land fill. It also requires entirely new materials to be used which of course each produce some level green house gases