Today is a continuation of yesterday's article about deciding whether to sell our old home and move into a new one or to stay and fix up the one we're in. Yesterday we looked at the emotional side of our decision. Today I want to give you look at the financial side of it.

Our first real learning when we went out to take the pulse of the new home market was that new homes were expensive. Moving, just like remodeling, we knew right away would mean taking on more debt. We found that getting the features we wanted in a new home would mean taking on an even greater amount of debt than we had planned. The level of debt would still be affordable, but it would also be quite a bit more than we really wanted to take on.

Not only would moving mean taking on more debt than we had planned, but it was also hard to find a close match to what we wanted in a new home. We were looking for upscale features in a smaller home. What we found was all the homes with upscale features tended to be much larger than we needed, or wanted. We didn't want to pay for all the extra space we didn't need or wouldn't use. Worse, smaller homes didn't have the premium features we were looking for. We also wanted a large lot. We could find few new homes in our target areas which had lots big enough. Most new homes today seem to be built too close together with little space left for a yard.

the Custom Home route
When we combined all of this, it started to look like building a custom home was the answer. We contacted a couple of custom builders and explained the decision we were trying to make. Our reasoning was that by being completely up front with our intentions we'd be equally likely to get answers trying to sell us on the idea, and answers trying to get rid of us. That way we'd at least have a range of cost figures on which to base our decision.

Remodeling was much harder to estimate
We looked at what it would cost to fix up our existing home. much harder to nail this down because we didn't really know what we wanted to do. Talking to remodelers didn't work because they all immediately go into selling mode, so any drive-by estimates are bound to be way low. In the end we decided just to use the custom builders' ranges for per-square-foot new construction. At the very least we knew using those figures would set a maximum remodeling project cost.

So there you have it. For us the decision came down to simply comparing the cost per square foot of construction. Because the new home we wanted to build would be smaller than our current home, and because the proceeds from selling our current home would go to building the new one, the numbers were closer than you might expect. In the final analysis, it was remodeling that won out over building new.

We feel like our decision was a good one because of the way the real estate markets are going now. We might not have gotten as much as we needed from our old home. And had we built a new custom home, it may not have appreciated in value. In fact, it might possibly decrease in value in much the same way a new car does when you drive it off the lot.

Our decision to remodel was also driven by the way in which we ultimately decided to pay for the work. In fact you might say it was this single factor that in the end weighed most heavily in the decision. We found a way we could borrow as we needed the money and pay it back over time according to a normal mortgage-like amortization schedule. sort of combination of credit card and mortgage. Tomorrow I'll wrap up this series of articles with a brief description of how we financed our home remodeling projects.