Perhaps your family has grown or you just want a different floor plan. What’s the best option for you financially: renovating or moving?

First, you’ll need to figure out what you would like in a new house. Make your priorities as specific as possible. Michael Berton’s family of five, for instance, required an extra bedroom, another bathroom and an expanded living room.

Armed with their list, Berton and his wife met with many contractors to discuss expanding their house, and received some cost quotations. Then they went house shopping to see if they could find something for around the same amount of money as renovating. Why bother renovating if they could find a house for sale that already met their requirements and budget?

In the end, they found buying a bigger house would cost much more than renovating, especially when they factored in fees payable before they even took possession. In a major Canadian city, real estate, legal, land transfer and moving costs could set you back $50,000 or more. That’s money you could have spent on renovating your existing home, notes Berton. Also, it’s rare to find a house that doesn’t still require some work.

“We would have had to somehow rebuild every house we saw, so for us it was a good idea to renovate. We also really liked our current neighbourhood,” said Berton, a financial planner with Vancouver-based Assante Wealth Management.

That isn’t to say that renovations don’t come with extra fees of their own. Major renovations like the Bertons’ can require homeowners to move into temporary living arrangements for months. But the Bertons had factored that cost into their budget. Depending on the extent of your reno, some builders will allow you to reside on-site (i.e., move to the basement while construction takes place on the main floor). While this can save you money, you’ll have to be prepared to live in crowded quarters for months, says Berton.

If you renovate, Berton advises you to budget an extra 25% for contingencies. During the project, people often decide to upgrade to higher-end finishes or forget about pricing out things like flooring or curtains. And sometimes, things beyond the homeowner’s or contractor’s control just happen. You see these scenarios on home-improvement TV shows all the time.

“With renovations, you don’t know what’s beyond a wall until you take it down,” says Berton. “Contractors may discover a problem. In our case, we needed to do rainwater work that cost us an extra $10,000.” Some people may simply increase their budget accordingly but for the Bertons, it meant giving up some planned initiatives like custom stonework for the front of the house.

These issues are why you may opt to move instead, notes Virginia Chaulk, a Toronto-based real estate agent with Remax Canada. She finds some people are intimidated by handling big projects themselves and dealing with contractors and architects. She says most renovations involve the hassle of two moves (move out while renovations are going on, move back in when they are complete), whereas if you buy a place that’s already renovated, it’s just one move.

If you’re in a time crunch, moving can also make more sense, since renovations are rarely completed on schedule, according to Chaulk. One of her clients decided to renovate and is now suffering through a six-month project delay; she’s now on her third contractor. “You have to do your homework and get a reputable contractor,” Chaulk says. 

9 smart steps if you're moving and/or renovating:

  1. Get pre-approved for a mortgage. 
  2. Start house-hunting six months before you want to move. 
  3. Figure out your moving, real estate, legal and land transfer costs. 
  4. Factor in additional costs for possible home repairs or renovations. 
  5. Get quotations and references from several contractors. 
  6. Ask contractors if they will allow you to live on-site during construction. 
  7. If you have to move out, factor relocation costs into your budget. 
  8. Add a contingency fund of at least 25% to any renovation budget. 
  9. Plan for delays.