Movin’ On Up

Q We have 13 years remaining on our mortgage and have been trying to discern whether we should add on to this home. It will cost $30,000 to make the additions we want, and the resulting payment would stretch us financially. As an alternative, we are considering buying a larger home. To do this, we would have to go back to a 30-year mortgage. By having our current home paid off in 13 years, we would be completely debt-free by the time our first child is ready for college. We like that idea. Would you recommend moving, adding on to our current house — or doing nothing?

A This is a common question for growing families. As the number of children in the family increases, the starter home that seemed so big when you first bought it begins to feel like a closet! From the information you've provided, it's difficult to know what your best option is. By considering the following issues, though, I believe you'll be able to make a wise decision for your family.

The key to your decision rests in answering why you are considering a larger home. Is your current home truly too small for your family, such that you need more space, or is the improvement really more of a want? I remember one family who had three girls in one bedroom. While they desired a larger home, they knew they couldn't afford to take on additional debt. Finally, after they had their fourth child, they knew they had to do something — but, by that time, they had saved the $30,000 they needed to make the necessary improvements to their home.

Maybe you, too, need a larger home but can sacrifice for a year or two to develop greater savings in order to minimize the debt you take on. In any event, one important step will be to complete “what if” budgets for each of the possible scenarios. In this way, you will have a greater level of confidence that all of the financial pieces will fit together. I think your goal of being debt-free when your oldest child reaches college is a good one. These budget scenarios should take that objective into account.

If you decide that you truly need to have more space, make sure you compare apples to apples when considering adding on and moving. Remember that moving will have its own costs (Realtor commissions, title, escrow, etc.). In addition, you'll probably find that you'll spend money on improvements once you move in to make the new place “feel” like your home. It might be that the cost of an addition isn't so bad in that light.

On the flip side, would you recover the cost of the addition when you eventually sell your current home? If not, it may be a better investment to move into a larger home that will better hold its value.

By considering these issues, you'll make a housing decision that honors God and will be good for your family. God love you!

Phil Lenahan is executive director of Catholic Answers in El Cajon, California.

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