Trying to decide if you should remodel or renovate? Check out the following 8 questions to ask yourself before making the leap in either direction.

1. Is your home in your heart?

Your emotions will have a lot of say in whether you stay or go. How do you feel about your location? Your neighbors? If you have a strong connection to your neighborhood or emotional ties to your home, renovating may be the best option for you.

2. How will you pay for remodeling?

Realistic budget planning is critical when deciding whether to make your current home work or look for another one. Let’s say a couple has $50,000 to renovate their home, and the contractor says he can do it for that. But then their wishes change, they want different materials that cost more, it doesn’t come out as they imagined — and that’s where the budget gets blown up. It’s important to know exactly what you want moving into a renovation and realize that changing things partway through can result in spending a lot more than you initially planned.

3. More room or more rooms?

Many homeowners base their decision to sell on the need for more space. However, a smarter layout that adds one more room but not more square footage can help some homeowners avoid moving. A spacious three-bedroom home can often be reconfigured to four bedrooms and allow a family to have a more efficient layout without needing to leave the home they love. You could consider laying out your floor plan with a designer and seeing if a reconfiguration could make sense. It is often much less disruptive and expensive than a move, and may solve your problems.

If you can’t find a spot for a new room? Maybe it is time to sell.

4. Can you afford to move?

Does your current home have what you consider to be a serious problem? It could be neighbors you can’t tolerate, a not-so-great school district or a cramped physical setting — including home and yard — that will never meet the needs of your growing family.

If that’s the case, you really have just one choice: Move.

But maybe the issue is that you essentially can’t afford the home you currently have — a situation known as being “house poor” — so a downward rather than upward move is necessary.

Either way, moving isn’t free. Buying a home has plenty of hidden costs, such as escrow, transfer taxes, and moving expenses. Before you decide to move in order to save money, understand the complete costs of buying a home.

It’s a good idea to stay in your house as long as you can, to gain the most equity you can, and recoup any of the closing costs of buying your current house. Many realtors recommend following the “five year rule” to ensure the equity you have built in your home will more than cover any selling and moving expenses.

However, moving sooner than that is sometimes unavoidable. If that’s the case for you, understand the costs of selling your home after a short period to budget accordingly.

5. How long will a renovation take?

Many people overlook the fact that renovation involves a serious, long-term commitment in time and energy. A major kitchen remodel involving new countertops, cabinets, appliances and floors typically lasts as long as four months. If ductwork, plumbing or wiring has to be addressed, the job could take longer. A bathroom remodel can require two or three months, while a room addition can take a month or two.

You have to be ready to be very patient. It’s very difficult to live in something that’s being renovated.

6. Will you earn back the upfront costs?

Before opting to remodel or sell, try to determine what return on investment you’ll see on either option. If upgrading, what’s the average return on investment for the renovations you’re considering? Certain upgrades are more likely to help you earn back what you pay. For example, the National Association of Realtors’ 2022 “Remodeling Impact Report” found that the cost recovered for a refinished hardwood floor was 147 percent. The cost recovered for insulation upgrades was 100 percent. But there was typically lower cost recovered for things like kitchen remodels (67 percent) or adding a bathroom (63 percent).

If you’re thinking of listing your current home and buying another one somewhere else, ask yourself whether you’ll be in the new place long enough to recoup the costs of taking out a new mortgage and moving. It typically takes between five and seven years to earn back those upfront costs.

7. Would you be over-improving?

Weighing against renovation is the risk you’ll “over-improve” your home compared with others on the block.

An over-improved home won’t sell for as much in its location as it would in a neighborhood with similar houses. When you are in a neighborhood that has starter homes and smaller homes, adding a large addition or doing an extensive renovation may not yield the return one would expect.

8. What’s the local housing market like?

Making a house purchase solely based on current real estate trends doesn’t always make sense, but understanding the local housing market can help with your decision to move or renovate.

Think about the factors impacting the residential real estate scene:

Are mortgage interest rates trending high or low?
How is the inventory of single-family homes?
Is it a buyer’s market or a seller’s market?
What’s the pace of sales — how long are listings remaining active?
How does the cost of buying a house in your town compare to labor costs?

Also consider the time of year. Winter is typically a more favorable season for buyers: There’s less competition from other house-hunters, and sellers are often more motivated to lower prices or agree to concessions to close a deal. In contrast, sellers rule in spring and summer, the traditional home-hunting seasons. Weigh how dire the need to move is against the calendar — it can make a big difference in getting a bargain or paying a premium for a new home.