12 September 2014

To make improvements, or to move house?

If you need more space, or just want better living arrangements, it can be difficult to decide whether to up sticks and move to another property, or carry out improvements to your existing home.

A number of factors, such as your finances, neighbourhood, the size of your family and saleability of your house all need to be taken into consideration. This guide weighs up the pros and cons of moving and improving to help you decide which option is best for you.

Improving

If you enjoy living where you are and get on well with your neighbours, staying put and extending or upgrading your property could be more cost-effective than moving, as you’ll avoid estate agent’s and solicitor’s fees, stamp duty, and other costs associated with moving house. Improvements may also be your best bet if you don’t have much equity in your home.

An extension could provide the extra space you need and give your home a new lease of life, or you could convert a loft or basement to create an extra room.

Adding value

Carrying out home improvements can add considerable value to your property, especially when you create extra space. According to a Nationwide House Price Index Special report in April 2014, adding a bedroom through an extension or loft conversion can add more than 20% to a property’s value, while adding an extra bathroom adds 5%. Double glazing and other energy efficiency measures are also attractive to buyers if you decide to sell up in the future, and will save you money on your monthly bills in the meantime.

If you’re redecorating, it might be an idea to concentrate on the kitchen and bathroom, because these two rooms are very important to buyers. It’s relatively easy to improve them without a complete overhaul, just by updating features such as taps, tiles and lighting.

Things to watch out for

Although improvements can make your home more valuable, they can also have the opposite effect. Building a conservatory that sticks out like a sore thumb, or failing to utilise extra space effectively, will make a house less attractive to potential buyers. Creating a new bedroom might make your property more appealing to families, but not if it means making existing rooms uncomfortably small.

Other things to consider include the disruption involved during the work, and the stress involved if things do go wrong; all of this can put a strain on relationships. Building work can often take a lot longer to complete than you’d expected and, if the work is of poor quality, you just might end up wishing you’d moved instead.

Many people who carry out improvements fail to inform their home insurance company, but this is a must to prevent your policy becoming invalid. Once the work is complete, you’ll need to reassess any increased value in buildings and contents cover.

Ceiling price

If you do decide to carry out home improvements, you need to be careful that you don’t price yourself out of the market. Every street in the UK has a ‘natural ceiling’. If the average house price on your street is £180,000, installing extensions and expensive features above this ceiling figure is a bad investment. You could end up losing money or stuck in your home, unable to recoup costs in the asking price.

Paying for home improvements

Once you’ve decided what improvements to make, you need to work out how you’re going to pay for them. Using your savings to finance the work will help you to avoid sliding into debt, although you may want to make sure you still have some money to fall back on just in case of emergencies. If you have equity in your home you could consider re-mortgaging. Otherwise, a personal loan or finding a credit card offer which includes an interest-free period could be good options.

If you’re experienced at DIY, you can save money by doing some improvements yourself. It’s a good idea to set a budget and stick to it to avoid costs spiralling out of control. Nationwide found that around a third of people who carried out DIY projects last year overspent, so be careful to take into account all the costs involved.

Moving

There are lots of reasons why you might prefer to move instead of improve. For example, you may have outgrown a flat or small house, you might want to move for work, or to be nearer family, or you might have young children and want to move to an area with better schools and facilities. Or it could just be that you’re fed up of staring at the same four walls every day and fancy a change.

We offer a number of tools that help smooth the mortgage process.

  • Find out how much you’d be able to borrow with our mortgage calculator
  • How much will it cost you to move? Find out with this cost of moving calculator
  • Find out what house prices are like in your area with our house price calculator

Home improvements may not be for you if you’re not thinking of staying at your current house for a long time, or if you’d prefer to avoid the stress and disruption they can cause.

Mortgage

If you are looking to move, the first thing you should do is find out whether your existing mortgage is ‘portable’ and whether you’ll be able to borrow more from your lender if you need to. Mortgage checks are becoming more stringent, so your lender may refuse to port the loan if you no longer meet their criteria. It might be cheaper to switch your mortgage to a different lender, but make sure you’ve taken into account any early repayment charges and exit fees.

Extra costs

On top of taking out a bigger mortgage, there are other costs to factor into your budget, including estate agent, survey and conveyancing fees, stamp duty charges and moving costs.

Stamp duty charges start at 1% on properties bought for between £125,000 and £250,000, rising to 7% on those valued at more than £2 million. So if you bought a house for £350,000, you’d have to pay £10,500 in stamp duty at 3%.

You can expect to pay around £1,000 if you hire a removals company to transport your belongings to your new house.

Once you’ve calculated all the costs involved in moving you can decide whether improving your home is the better option.

For information on Nationwide products, see our Credit Card, Loans, Mortgages and Home Insurance sections.

YOUR MORTGAGE IS SECURED ON YOUR HOME. THINK CAREFULLY BEFORE SECURING OTHER DEBTS AGAINST YOUR HOME. YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE.

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