If you have got to the point where you and your family have outgrown your current home and you need more space then quite often the first thing you will consider is simply moving house. Then you might look at converting your loft or garage or even building a brand new extension.
Of course we think that converting your garage would be the best idea but in these financially unstable times which one is the most cost effective? Which one has a chance of actually increasing the equity in your home?
The study below shows 4 options to increase the space in your home and the financial implications of each on a typical family home.
These figures are based on a typical 3 bedroom home which we have decided is currently worth £225,000 however the principals remain the same whatever the size or cost of the home. In fact a larger house would end up costing you even more for stamp duty and estate agent fees.
In order to move house there are bills for both selling your house and buying the new house. The table below shows the basic costs but there could well be other costs that would be payable by you that we have not considered.
| Selling your current house (a 3 bedroom home worth £225,000) | |
|---|---|
| Estate Agent Fees (1%) | £2,250 |
| Legal Fees | £1,000 |
| Removal Expenses | £1,000 |
| Buying your new house (a 4 bedroom home worth £275,000) | |
|---|---|
| Stamp Duty (3%) | £8,250 |
| Legal Fees | £1,000 |
The total cost for moving to a bigger home would be £13,500 plus the actual difference in cost of the new home, in this case £50,000. Therefore the total cost of moving will be somewhere in the region of £63,500 which of course gives you a brand new home which you will be very happy with.
Not everyone is in a position to move house and it's not easy to see where you could raise the extra £50,000 pounds to buy the bigger house. That's not to mention the friends and neighbours that you would lose when the moving day came (we recognise that for some of you this may be a good thing!). The fact remains however that moving may not be an option and so a 'typical' garage conversion that would cost just £10,000 may be the better option.
Worth noting at this point is the fact that a conversion to a house will almost always increase the value of your home by some degree. In the case of garage conversions it is accepted that you can expect an increase of approximately 10% to the overall price of your property. Therefore our typical 3 bedroom home is now worth £247,500.
Loft conversions, if completed to a high specification are fantastic. The only issue that we have with loft conversions is simply the cost involved. A typical loft conversion would run to £35,000 or even £40,000 and although it will increase the equity in your home it will rarely be enough to justify the initial outlay.
It is accepted that a good loft conversion will be worth up to 15% on top of your property's current market value. So our 3 bedroom house with a loft conversion is now worth £258,750
Similar to a loft conversion although cheaper it can still be a costly affair and there is always the danger of getting stuck in planning purgatory. A similar sized extension to the garage you never use would cost approximately £30,000 and would increase the value of your home by up to 10%. So again the 3 bedroom house we call home has increased to a total of £247,500
Let's compare the facts;
| Move House | Garage conversion | Loft Conversion | Extension |
|---|---|---|---|
| £63,800 | £10,000 | £35,000 | £30,000 |
| - | Increase by 10% | Increase by 15% | Increase by 10% |
| - | £22,500 | £33,750 | £22,500 |
| -£13,800 | +£12,500 | -£1,250 | -£7,500 |
This means that only the garage conversion has a chance of making you money! The other options will all cost you money that you will not see again.
So in an ideal world you could improve your home, get the extra space you need and when you eventually do decide to sell your home you will make more money than you spent on the conversion.