Adding On vs. Buying Bigger

If you’re buying your first home, starting a family, or just flat out need more space you may find yourself considering if you should add on and remodel or if it’s better to start searching for a bigger home. Sometimes it’s a fairly obvious choice, and sometimes it can be a very complex and emotional decision. There are so many factors to consider including finances, your timeline, and your needs.


Adding On

After living in a house for a little while, you really start to understand the flow of how you use the space, how you entertain, and how you interact with your family. You start to see where you would like things to be more open, or more private. Adding on gives you the opportunity to create a custom space that truly works for you and your family.

This is also a good option if you have a flexible timeline. Working with an architect and engineers to draft plans isn’t exactly the speediest process. You will also need to get permits and line up a contractor, which can take time, especially if builders have a busy schedule. If you live in Emerald Hills or Palomar Park, and are granted permits through San Mateo County, budget even more time for design reviews as part of the permit process.

Location plays a huge factor in making a house a home. If you love your neighborhood, it can make sense to add on and stay put, than buying something bigger in a less desirable neighborhood. Consider your nearby schools, parks, walkability, and commute paths. Sometimes you don’t realize you miss those things until they change.

Adding on to your existing home, means that you can keep your property tax base low. Your property will be reassessed after adding on, but depending on the work you're doing, it may be less expensive to go this route, especially if you bought your home before the current housing boom.

Staying in the same home can also make sense financially if you’re 5-10 years into your mortgage. At that point a larger portion of your monthly payment goes towards paying down your principal, and you pay your loan down faster.


Buying Bigger

You get to switch things up. It’s exciting to move into a new home and make it your own. Since it’s not your first rodeo, you may have a better idea of what you’re looking for and what’s important to you than you did the first time around. Buying a new house gives you a chance to focus in on those must haves.

If you are on a tight timeline and don’t have months or even a couple of years for your house to be done, then it can make more sense to buy something. The reality of remodeling is that it takes more time and money than you may originally anticipate, while on the other hand the real estate market is incredibly fast paced. Many people close escrow in 7-30 days after their offer is accepted.

If you bought your house at least two years ago, the odds are that you could sell it for a lot more than you paid for it. In that case, it may make more sense to move up and move out. You may also be able to take advantage of not having to pay capital gains taxes on some or all of your gain.  Talk to your CPA for more details on this.  

You may also be able to get a better interest rate, if you haven’t refinanced in the last two years. Mortgage rates are still low, so if you’ve been thinking about moving, it’s a great time to get locked in before they start to rise.