Renovate vs. Move: Which Is the Better Call Right Now?

If you're unhappy with your living space, you have options -- but which is the best one?

It's common for people to buy homes that aren't necessarily perfect. Maybe your home has an outdated kitchen, or a basement that isn't usable as living space in its current state. If you're looking at a big renovation project, you may be wondering whether it pays to deal with the cost and hassle involved, or whether you should just move to a new home instead.

The latter might, in some cases, be the easier route to take. But it's not necessarily the most cost-effective one, especially given home prices and mortgage rates today.

The upside of moving

Living through major construction in your home can be difficult, to say the least. In some cases, it could completely upend your life.

Let's say you're having your kitchen redone. If that means not being able to cook or store food for 12 weeks or more, it's easy to see why the idea of that isn't appealing. And so you may be inclined to just buy a home that's move-in ready instead. While you will have to deal with the hassle of selling a home and packing up your life, that may, in many cases, be less of a headache than living through months of construction.

Then there's the cost of renovations to consider. If you're looking at spending, say, $50,000 to gut your kitchen and put a new one in, you may decide it's worth it to spend a bit more money on a home with an already updated kitchen waiting for you. While doing so might increase your monthly mortgage payments, if you have to finance a kitchen remodel, you'll be looking at loan payments either way.

The upside of renovating and staying put

The idea of moving might, in some ways, seem easier than enduring a lengthy renovation. But before you start making plans to uproot your life, remember that buying a home is not an inexpensive prospect these days.

In January, the median U.S. home sold for $359,000, as per the National Association of Realtors. That's higher than the median home sale price one year prior.

Also, mortgage rates are up these days. Between higher home values and borrowing rates, you may find that a new home just isn't within reach financially -- or that you'll be stretching your budget way too thin to buy one.

Now, you may be thinking, "But if I have to take out a loan to renovate my existing home, what's the difference?" Well, the difference is that you may be talking about bearing a higher interest rate on a $50,000 personal or home equity loan to redo your kitchen. If you buy a new home, you may have to take the hit of a higher interest rate on a $300,000 mortgage. And that's on top of closing costs, moving costs, and the many other expenses associated with selling a home and finding another one.

What's the right call?

Ultimately, it's possible to make the case that moving makes more sense than renovating, or vice versa. But based on today's housing market conditions and borrowing costs, you may be better off dealing with the upheaval of a renovation.

Remember, too, that any time you buy a new home, there are certain unknowns you'll have to grapple with. Will the hot water kick in as quickly as you want it to? Will the air conditioning be sufficient during the hottest summer days? And are there hidden problems lurking that will cost you money?

When you stay put in your current home, you don't have those unknowns or gotchas to worry about. And that could make for a much less stressful situation.