With today’s higher interest rates, customers wishing to upgrade their home may be concerned about how much they can afford. They may also be wondering whether they’d be better off to buy a new home than renovate their existing one. While everyone’s situation is unique, there are a several factors that can help them to decide.
One of the key issues is the shortage of available new housing stock.1 Higher interest rates and recent supply chain issues have contributed to a reduction in new housing starts. This has caused an increase in new home prices. However, despite rising interest rates, a newly released study finds, “the median planned spend on 2023 renovations is $15,000, the same as it was in 2022. Homeowners with higher-budget projects (the top 10% of spend) plan to spend $85,000 in 2023, up $10,000 (from $75,000) in 2022.”2
Ron Pertl, SVP of Business Development Water Treatment/Key Accounts for Aqua Finance, says one of the reasons for this is that a home renovation can be a more affordable option than a move.
He suggests sharing the following three factors with potential customers:
1. There are advantages to financing a project instead of a home
For those with an existing fixed-rate, low-interest mortgage on their current home, there are advantages to hanging onto it instead of buying a new home and taking out a higher-rate mortgage. Upgrading via a home renovation means they can do just that. Instead of refinancing their entire home at a higher interest rate, they can apply for financing to cover only the specific cost of the project they wish to undertake.
Key takeaway: When interest rates are rising, financing a home-renovation project can end up costing less than refinancing an entire home.
2. Purchasing a home requires additional expenses
It costs more to move than just the price of a new home. Closing costs typically range from 3% to 6% of the loan amount when purchasing a home.3 These include agent’s fees, legal costs, land transfer fees and moving expenses.
Key takeaway: When comparing the cost of moving versus renovating, it’s important to consider the additional costs involved in buying a new home.
3. Remodeling is more likely to suit your customer’s exact needs
Most people who buy a new home still end up wanting to make a few changes to it. This can add substantially to the overall cost. Renovating an existing home means they can focus on (and finance) only the upgrades they wish to make. A 2022 report on the state of home spending found that beyond home maintenance, the top projects of the year were painting an interior space (33.6%), remodeling a bathroom (28.9%) and installing new flooring (27.8%). 4
Key takeaway: It may be less expensive for your customers to adapt their current home to suit their exact lifestyle needs than to buy and renovate a new one.
To learn more about how Aqua can help finance your customer’s home renovations, contact us today at:
800-234-3663, option 4, ext. 6094