Renovate or move | Compare costs, benefits and risks - NAB
Why it’s difficult to decide whether to renovate or move
Many homeowners reach a point where their current home no longer feels like the right fit. Often this leads to a big question: should you renovate or move, and which option is financially smarter? But it isn’t always an easy decision. While renovating can improve how your home looks and functions, moving can offer a fresh start in a better-suited property. Both paths can come with risks, so before you decide, it helps to take a closer look at the real costs of renovating vs. moving, and how each choice affects your borrowing and what makes most sense for your goals.
Understand the costs of selling and upsizing
If you choose to sell and move into a bigger or more suitable home, the costs can add up quickly. While a mortgage is your biggest cost, there are several extra fees that can make moving more expensive. Moving also means entering a more competitive market. If prices in the area you’re looking to buy in are rising, you may need to stretch your borrowing capacity further, increasing your long-term financial commitment.
Understand the costs of renovating
Renovating can seem like the simpler choice compared to selling and moving, but the costs can vary a lot depending on the type of work you plan to do. Some upgrades are small and mostly cosmetic, while others involve major structural changes and require council approval, builders, and specialist trades.
One of the biggest risks with renovating is budget blowouts. It’s common for problems behind walls, outdated wiring, or plumbing issues to appear during construction. These can push costs higher than expected. There’s also the risk of overcapitalisation, which happens when you spend more on the renovation than the value it adds to the home. This is important to consider if you hope to sell in the future or use your equity to borrow again.
Renovation loans or construction loans may also be structured differently from a standard mortgage. Your bank might release funds in stages, based on how much of the project has been completed. It’s crucial to have clear quotes, timelines, and a realistic idea of how much the renovation could change your financial position.
Financial factors to compare
Equity and borrowing power
Your equity helps determine what you can afford to do next. Strong useable equity gives you more borrowing options, whether topping up your current loan for renovations or putting money towards a deposit on a new home. If your equity is low, both paths may be harder to fund, so understanding this early can guide your decision.
LVR and extra loan costs
Your loan-to-value ratio, or LVR, is the size of your loan compared to the value of your property. A high LVR (over 80%) may mean paying lenders mortgage insurance (LMI). Renovating can sometimes lower your LVR if it increases your home's value, while moving could raise it if your deposit does not keep up with the new purchase price.
Return on investment
Before choosing between renovating or moving, think about which option gives you a better return on investment. Some renovations, like kitchens and bathrooms, deliver stronger value, while highly personalised upgrades might not. Moving to an area with long-term growth potential can sometimes be a better investment overall.
Lifestyle considerations
Money is a major factor when deciding whether to stay or move, but your day-to-day life matters just as much. Thinking about how each option affects your comfort, routine, and long-term plans can help you make a choice that feels right, not just financially smart.
How much you value your neighbourhood
If you love your current area, renovating may allow you to stay connected to your community. But if you want better amenities, more space, or a different lifestyle, moving could offer benefits a renovation cannot.
Your ability to handle renovation disruption
Renovations can be noisy and messy, and some take months. If the idea of living through this feels stressful, moving might be the easier option.
Whether moving improves your lifestyle
A new home could bring shorter commutes, better schools, or easier access to transport and services. These lifestyle gains can be just as important as the financial ones.
Quick comparison: renovate or move
| Sell and upgrade | Stay and renovate | |
|---|---|---|
| Upfront costs | Sell and upgrade High due to stamp duty, agent fees, marketing, legals and moving costs | Stay and renovate Varies by projects, with risk of unexpected expenses |
| Disruption | Sell and upgrade Short term, focused on packing and moving | Stay and renovate Ongoing noise, dust, and limited space |
| Moving stress | Sell and upgrade Preparing for sale and buying again | Stay and renovate No relocation, but live through construction |
| ROI potential | Sell and upgrade Depends on market growth | Stay and renovate Risk of overcapitalisation |
If you’re unsure which path suits your budget and lifestyle, speaking with one of our home loan experts can help you understand your equity, borrowing options, and the financial impact of each choice. We’ll guide you through the costs and help you decide which option fits your goals.
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The information contained in this article is intended to be of a general nature only. It has been prepared without taking into account any person’s objectives, financial situation or needs. Before acting on this information, NAB recommends that you consider whether it is appropriate for your circumstances. NAB recommends that you seek independent legal, financial and taxation advice before acting on any information in this article.