You have outgrown your home, kids need more space, the home office has been converted into a children's play area and there is always morning traffic at the upstairs bathroom with 2 parents and 2 kids fighting for their time slot.  A dilemma city dwellers face; should we sell our home and move up or renovate and stay? 

There are factors to consider whether to sell the home or renovate it. Here is a checklist:

• How much equity do we have in our home after selling & buying costs?
• Are we in a good school district or do we need to move to another school district?
• What are the needs vs wants?

Home Equity

Here is a list of costs to take into consideration when calculating your net home equity:

1. Selling fees (4.5%-5% +HST) of your current home value
2. Legal fees $1200-$1500 +HST
3. Moving fees $1000-$4000 + HST (depending on how much content and distance you're moving)
4. Land transfer taxes & legal fees: In Toronto budget for 3.5% of the purchase price
5. Soft costs: painting, light fixtures, minor repairs, blinds/drapes, change keys, cleaning....etc. 

School District

TDSB has EQAO ratings on schools in Toronto which can be used as a guide. A great way to research schools is by interviewing the principal, talking to parents at pick up or drop off time to get a good feel for the school. Ratings are indicators and do not necessarily tell the full story.

TDSB Find Your School

Needs Vs Wants

This can be a hotly contested issue as the line between needs vs wants can be blurry.

Do you need or want:

• Master ensuite?
• Home office?
• 4 bedrooms? Or 3 bedrooms and 1 basement bedroom will do?
• Powder room on the main floor?
• Backyard?
• Front parking pad?
• 7 foot basement?

The Third Option

There is another option to consider: renting your current home and pulling equity to buy your next home. If there is adequate equity to help you qualify for the next purchase, keeping your existing home as investment property is good way to diversify your long term investments and build long term wealth.

How much rent can you generate? Depending on current home location and condition, 3 bedroom 1-1.5 bathroom can rent for $2400-$2600 and the 1 bedroom basement can rent for $900-$1250 with utilities paid by the tenants.

Here are the numbers:

Rental Income: $3200-$3850
Mortgage Payment: $2662 ($650,000 mortgage amortized over 30 years at 2.79% based on 80% of $815k current home value)
Property Tax: $300
Insurance: $100
Monthly Net Income: $138-$788 

Want to find out if you have enough equity and whether you should renovate or sell? We can help you with the calculations.