My husband and I are putting money aside now so that we can remodel our current home as soon as our children are out of college. We are planning a remodel after touring new home models in our area that would be ideal for downsizing. Homes ideal for empty-nesters in new subdivisions are selling for a lot more than we could get for our resale home. Our plan is to be able to retire in place by using the square footage in our home for different purposes. We plan to update our home that we purchased about 10 years ago as soon as we have no mortgage debt and enough money saved. We aren't entertaining the idea of a home equity line of credit.
Crunching the numbers
If we stayed in current home, we could spend about $40,000 on remodeling plans. We probably wouldn't want to just make a lateral move to a similar home. We'd be looking at upgrading to a newer home, which comes at a premium. Our current home is worth $140,000, although we purchased it for $180,000. After spending $40,000 by remodeling, our total investment not including the interest we paid on our mortgage, would be $220,000. That compares to the $270,000 list price for new homes in the market that are the same size.
Owing less on our mortgage
According to an article by ConsumerReports.org, remodeling activity is the highest it's been in seven years. The Remodeling Market Index hit 50, which indicates some homeowners are feeling more optimistic about the value of their homes. I know our home hit bottom last year at about $115,000. I am happy to see the value has gone up. At the same time, I've also been trying to pay down our mortgage. Since we only owe about $100,000, I don't mind investing $40,000 on a home that is worth about $140,000.
Waiting until we are mortgage-free
Because we have a few more years before we are empty-nesters, I am trying to accelerate the payoff of our mortgage. If we can be mortgage-free when the children graduate from college, then we can pay cash for our remodeling projects. Even though the cost of new homes continues to rise every year, the cost of renovating or remodeling appears to stay fairly consistent. By waiting a few years, we should still be able to make the updates to our home that we desire without spending $50,000 or possibly much more on a new construction home.
Finding affordable ways to update
As we wait for our home to become an empty nest, we are spending money making inexpensive improvements. By cleaning and decorating our home each year, it makes it easier to wait on any major remodeling plans. I estimate we spent $500 this past year by having the carpet professionally cleaned. I also spent money on interior paint and paint supplies as well as new drapes and artwork.
Another option we have is to break up our renovation plans into smaller pieces. We could spend $5,000 on the new kitchen counters now, but save some of the other projects for the following year. After doing some research, we estimated our improvements to our kitchen, bathrooms and driveway will cost about $40,000. Whether we wait to have everything renovated at once or do it one room at a time, having a plan and a goal motivates us to save. Also, we like the idea of improving what we already own so our children will still want to visit their former nest.
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