• Should You Sell and Upsize or Renovate Your Existing Home?

  • In Canada we have two past times or conversations that get people heated up! One is the weather and the other is real estate. The last few years have given people lots to talk about – even those that are not directly in the real estate industry.

    We speculate when the market crash or softening will happen; where prices and interest rates are headed and what will happen when the market does soften. We have all come to expect bigger and better, even when bigger and better is not necessarily affordable.

    I personally don’t want bigger and better as I don’t want to be burdened with a huge mortgage but what do you do when you live in a house that you are outgrowing? What are your options?

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    My clients and I recently sat down to have this conversation. He wanted to sell and upsize and his wife wanted to renovate and expand their current home. They were constantly arguing about this so I suggested we look at what the numbers say!

    They had already spoken to an architect and had the plans drawn up for the expansion and they had also gone out shopping in their local market of Newmarket and the prices they were seeing were within their budget as they are both doctors and have the money to spend, however both being frugal wanted to do a full analysis to see which option would best serve their needs!

    They had 3 young children and loved the area they lived in as all 3 children attended the school, which was within walking distance. They had initially moved to this area because of the school. Being one of the more prestigious areas of Newmarket, they were not seeing anything they liked within the price ranges in the market.

    As I am a numbers gal I thought I would do the math to see which makes more sense. Problem is that I cannot forsee how much more this newer house would cost as we are in a seller’s market, with limited inventory and everything is selling for much higher than market value. So their budget of $800,000 for example might end up costing them well above that! Is it worth it? In my opinion no but let’s see what the numbers say!

    Option 1, was to buy a bigger house in the same area – prices range from $800,000 – $1,000,000 for 2,500 ft. They currently live in a 1,800 two-story home with a pool sized lot (but no pool).

    Option 2 was to expand on their current 1,800 two-story home and build out to 2,500 feet. With this expansion they would build out from the first story and also build down and expand the basement. This would give them a bigger kitchen, a bigger living area as well as a finished basement with a walk-out and another bedroom for guests. Their contractor estimated approximately $200,000 for the renovations but as we all know when it comes to renovations, you can never be sure that those numbers will be adhered to so it is always advisable to add 10-20% to the estimated budget.


    Sell Current Home $650,000 (current value in the neighbourhood)
    Payout existing mortgage $350,000
    Payout Mortgage Penalty $5,425
    Payout Realtor Commission $32,500
    HST on Realtor Commission $4,225
    Existing Debts $15,000

    Total left over $242,850

    New Home Purchase $800,000
    Downpayment 20% $160,000
    5 year fixed 2.49%
    Amortization 25 years (choosing this over longer amortization
    Monthly Mortgage $2,863.81
    Property Taxes $350

    Total Monthly Costs $3,213.81


    Existing Home Value $650,000
    Existing Mortgage $350,000
    Refinance and take out a HELOC (2nd) $250,000
    As they wanted to avoid paying the penalty

    1st Mortgage (existing) $350,000
    Rate (existing) 2.20%
    Amortization 22 years (remaining)
    Monthly Payment $1,516.07

    2nd Mortgage (new HELOC) $250,000
    Term 5 years
    Interest Rate prime + .5% 3.2% (interest only)
    Monthly Payment $676.53

    Total Monthly Payment $2,192.60
    Property Taxes $350

    Total Monthly Costs $2,542.60

    By renovating and expanding their current home, not only do they increase the value of their home but they also have a lower monthly mortgage of $671.21 Furthermore, by renovating they get the home of their dreams!

    Are you thinking of moving or renovating? Want to know what this will cost you to do? It’s always worth analyzing the numbers as everyone’s situation and needs will be different!