Renovating vs. buying a bigger home

Whether to renovate your current home or buy a bigger one depends on your financial situation, your family's needs and your local market. If mortgage rates are higher than your existing, locked-in rate, staying put and renovating may be the more strategic financial move. However, if your primary challenges are quality-of-life factors that construction can't fix, buying a different home may be the better choice.

Outgrowing your living space is a common problem homeowners face. Maybe you have a second child on the way, or your work-from-home setup is clogging the dining table. Or perhaps you just want to relocate to an area that better suits your lifestyle.

When your home no longer fits your lifestyle, you generally face a major crossroads: do you pack up and move, or do you stay put and remodel?

According to an April 2026 Citizens survey*, 71% of homeowners plan to complete a home improvement project within the next two years. This signals a major shift, with homeowners choosing to upgrade their homes rather than move.

The right choice depends on careful evaluation of your financial situation, your current family stage and your local real estate market dynamics.

Layout vs. location: What’s the real problem?

Before deciding between a renovation and a new mortgage, pinpoint the exact problem you're trying to solve:

• A layout problem: A lack of square footage, an outdated floor plan or an insufficient number of bedrooms are issues that a strategic renovation could fix.
• A location problem: A grueling daily commute, a desire for a different school district or a need to be closer to extended family or specific local amenities are geographic realities that no amount of remodeling can change.

Once you determine whether your issue is physical or geographic, choose the path that makes the most sense for you financially. Choosing whether to renovate or move isn't just a lifestyle choice. It's a long-term investment decision that will help shape your family's net worth. To find the right answer, weigh your personal space needs against local real estate market, tax reassessments and costs that come with each option.

Option 1: Buying a bigger home

Upgrading to a larger home involves selling your current home, paying the upfront costs of moving and taking out a new mortgage at the current market rates. Consider these pros and cons before deciding whether to purchase a larger home:

Pros

• Get the space you need right away: There's no need to wait for a weeks- or months-long renovation to be completed.
• Fix location issues: Moving may shorten your work commute and bring you closer to better schools, extended family and amenities.
• Get a move-in-ready home: You may find a home that better meets your preferences and space needs.

Cons

• Your new mortgage rate could be higher: If you were able to secure your current when rates were lower, applying for a new mortgage could mean a higher rate given today's market, which increases both your monthly payments and the total interest you pay.
• Managing two mortgages at once: If the timing of your sale and purchase don't align, you might find yourself temporarily paying two mortgages, which could put a major strain on your short-term cash flow.
• Heavy upfront transaction fees: Real estate agent commissions (4% to 5.5%) and closing costs (2% to 5%) add up fast. On a $500,000 home sale, these fees alone can run $30,000 to $52,500.
• Moving truck and transition expenses: Professional movers can charge up to $2,500 for a local move and $4,500 for a cross-country move, on top of any immediate repairs your new home might need.
• Potentially higher property taxes: Property tax rules vary by location. In some states, taxes are reassessed to match the new purchase price, which could increase your monthly housing expenses.

However, while the cost of moving is often high, it could still be a worthwhile investment. If you plan to stay in the new home for several years, the property's long-term appreciation may build substantial wealth and offset your initial expenses.

Option 2: Renovating your current home

The Citizens Dream House Reality Report* reveals that the top reasons homeowners avoid moving are the high costs of buying a home (36%) and not wanting to give up a current mortgage rate (19%).

"Today, more homeowners define success as feeling financially secure where they are and investing in their current home to make it work long term," says Fabien Thierry, Head of Home Equity Lending at Citizens.

Updating your current house may involve adding new space, remodeling a room or changing the layout. If you choose this path, it helps to weigh both the physical and financial trade-offs before making a final decision:

Pros

• Keep your current mortgage payment: If your existing rate is lower than current market rates, staying put preserves your original borrowing terms and prevents you from spending more on your primary mortgage.
• Avoid expensive moving fees: You completely bypass real estate agent commissions, closing fees and professional moving company bills.
• Stay in the community you love: There's no need to change school districts, alter commutes or leave a place that truly feels like home.
• Complete renovation work in stages: You can phase your projects over time as your budget and schedule allow, rather than paying for everything all at once.

Cons

• Living in the construction mess: A renovation project may take months to complete. Noise, contractor activity and debris could disrupt your daily life.
• Risk of contractor delays: Material costs may rise over time, and longer projects can increase your stress.
• ROI risk: Not all renovations are good investments. You may spend more than you can recover when you eventually sell your home.

Financing a renovation

When it comes to funding a major home upgrade, your strategy may involve paying with savings, tapping into your home's equity or a mix of both.

Using savings

Using your personal savings is the most straightforward way to fund a home improvement project, allowing you to pay for a portion or even the entirety of your renovation without taking on new debt.

If you're currently saving for an upcoming remodel, consider opening a separate account for it rather than using your standard savings or emergency fund. This helps you avoid the temptation to use the money for other purposes and stay on track with your savings goals.

Where is the best place to save money? A high-yield savings account or short-term certificate of deposit (CD) could help you earn interest while you plan the project.

Keep in mind that after the renovation is complete, you should still have enough money in your accounts to cover your daily spending needs with a financial cushion for emergencies.

Tapping into home equity

If your current home needs an upgrade faster than you can save for it, you may be able to use your property's built-in value to finance the project. Home equity loans and home equity lines of credit (HELOCs) both typically have lower rates than unsecured options. They differ in how you borrow and repay funds:

• Home equity loan: A home equity loan works like a personal loan with a fixed interest rate, except it's backed by the equity in your home. You receive a lump-sum amount and repay it with fixed payments over a set term.
• HELOC: A HELOC is a revolving line of credit with a variable interest rate that allows you to borrow funds as needed without having to pay interest on money you haven't spent, making it a good option for renovations that are completed in stages. Unlike a home equity loan, a HELOC gives you the option to make interest-only payments during the draw period, which can help with cash flow management.

Refinancing your mortgage

Refinancing replaces your current mortgage with a brand new one under different terms. With a cash-out refinance, you obtain a new mortgage to replace your current mortgage, but borrow more than the payoff amount. You can use the extra funds for renovations and other needs.

However, refinancing forces you to give up your current mortgage interest rate. If current market rates are higher, you'll pay more interest on the new loan, which could make this the less favorable option. If interest rates have risen since you took out your mortgage, a HELOC may be a better option than a cash-out refinance.

Your decision framework: An 8-step checklist

This checklist can help you decide whether renovating or buying a bigger home best fits your budget and needs:

1. Pinpoint your exact frustration. Decide if your issue is the house itself or the neighborhood and lot size.
2. Calculate the interest rate gap. Compare your current monthly mortgage cost against what a new mortgage would cost at current rates. Multiply that difference out over 10 years to see the real impact.
3. Add up the upfront moving costs. Estimate total agent fees, closing costs and moving trucks to calculate the cash you spend the day you move.
4. Get real remodeling bids: Don’t guess on renovation costs. Get two or three written estimates from local contractors, then add a 15% to 20% cushion for unexpected problems.
5. Check the neighborhood ceiling. Look at recent neighborhood sales to ensure your post-renovation value won't far exceed the price of the block's highest-priced home.
6. Double-check your cash reserves. Verify you have enough savings to cover the project or down payment while leaving your emergency fund completely untouched.
7. Explore your HELOC options: With Citizens FastLine®, you can see how much you may be able to borrow with a HELOC and your potential rate without affecting your credit score or committing to a loan.
8. Map out your timeline. If you plan to move in less than three years, the high transaction fees of buying or the short window to recoup remodeling costs rarely make it financially sound.
9. Talk to a financial advisor. Review the numbers with a financial professional to see how both options impact your long-term goals, like retirement or college savings, before signing any contracts.

Clarity before urgency

Carefully consider your options before deciding whether to renovate or buy a bigger home. Everyone's needs are different, and the right choice depends on current interest rates, whether you have liquid savings and your location needs.

Ready to start planning a renovation project? Explore Citizens HELOC and savings account options today.

Frequently asked questions

Can I finance moving and closing costs?

Many lenders allow you to roll closing costs into your mortgage. You can often finance moving costs with a personal loan.

How do I finance a home renovation without refinancing my mortgage?

Homeowners often borrow against their home equity with a HELOC or home equity loan for home renovations. How much you qualify to borrow depends on your available equity, combined loan-to-value (CLTV) ratio, credit score, income and monthly debt payments.

Will a renovation increase the value of my home?

Whether a renovation increases your home's value depends on the renovation and your local housing market. For example, a kitchen or bathroom remodel may have a strong ROI, while a swimming pool installation may offer a lower return.