Ask The Expert - May 2020

Real Estate

Q: With interest rates being so low, is it better to buy a home that is in move-in condition or one that needs remodeling?

 

A: Great question. Many times we think it is better to spend less money upfront as it seems like we are saving money. But by the time we get finished with remodeling a home, we often realize that we spent more than if we had just purchased something already set to go and we still may have deficiencies that cannot be overcome. Like the lack of a larger garage with spacious mudroom, or rooms that don’t flow with the existing home that was purchased. 

Most remodeling costs will end up 10-20% over budget in the end. It also turns out that most sellers never recoup all that they spend on remodeling and improvements, so when you are a buyer, it makes perfect sense to get the value from purchasing a home that has been well updated and walk into a home that is turn-key.

The other reason to purchase a home that is fully updated and to your liking is that you will get the best interest rate on a home purchase rather than a re-finance or home equity line. So if you find that perfect home that fits most of your needs, you can lock in at a great interest rate and spend the rest of your cash on the more important things of life—like retirement, saving for a college education, buying a car, traveling or just having extra money on hand.  

The other surprise in recent years is that jumbo loan rates have been lower than the conforming conventional rates so it makes for the perfect time to purchase your ‘move-up’ home.  And if you think you may pay off the home early or be there less than 10 years, you could consider locking in on a 10/1 jumbo arm loan where the interest rate is fixed for the first 10 years. That can bring down your interest rate to closer to 3% or under as I’ve seen them as low as 2.625% over the last 30 days.