Buying a home is an exciting milestone in life, but also a big decision. One of the largest decisions to make as a prospective homeowner is between purchasing a newly constructed home versus buying an older home and renovating it. While there are appealing factors to both routes, there are also unique pros and cons to each approach to homeownership. Here is an in-depth look at the pros and cons of new builds versus renovated homes to help you determine the best fit for your family.

A partially constructed building frame overlooking a lake, with ladders and construction materials visible at the site.

The Appeal of a New Build Home

Brand new construction offers many attractive benefits that homebuyers should consider.

Brand New Construction

With a new build, you are the first and only owner. Everything is brand new, from the roof to the foundation. New builds offer the chance to move into a home no one has lived in before.

Customizable Floorplans

New construction allows you to fully personalize your home. In many cases, you can choose or modify a floorplan to get the exact layout you want. Custom built homes enable you to add special features that suit your lifestyle.

Energy Efficient Features

New homes are constructed to modern building codes, which require energy efficiency. This means new insulation, windows, appliances, lighting, and HVAC systems tailored to save on utilities.

Minimal Maintenance

Since all materials and systems are brand new, a new build should require fewer repairs in the early years. You won’t have to worry about outdated plumbing or electric, saving you money.

Financing Options for New Builds

If you decide to build new construction, there are two main financing options to consider.

Conventional Mortgages

Many lenders offer conventional mortgages for new home construction. Rates and terms are similar to buying an existing house. You’ll need to pay the builder incremental draws throughout the building phase.

Construction Loans

With a construction loan, a lender will issue funds to the builder during phases of construction. When complete, these automatically convert to permanent mortgages. Construction loans enable one loan for the entire process.

The Appeal of Renovating a Starter Home

While new construction has perks, upgrading an existing house is also an excellent option. Here are some key benefits of home renovations.

Lower Purchase Price

The purchase price on a fixer-upper is typically lower than a new build. This helps you get more house for your money if you don’t mind taking on some renovations.

Established Neighborhood

When you buy an older home, you know what the neighborhood and community are like. An existing home lets you learn about things like noise levels and traffic ahead of time.

Cost Savings from DIY

Depending on your skills, you may be able to save substantially by doing some renovations yourself. Sweat equity keeps costs down while allowing you to customize your home.

Unique Charm

Older homes have vintage architectural details and craftsmanship that lend unique style. Original hardwood floors, stained glass, and ornate moldings offer character you can’t find in new builds.

Financing Options for Home Renovations

Renovating or upgrading a home also has specific financing options worth exploring.

Cash-Out Refinance

If you have sufficient equity, a cash-out refinance lets you tap funds to pay for renovations. You refinance for more than what you owe and use the difference to renovate.

HELOC

Home Equity Lines of Credit act as revolving credit lines against your home’s equity. You can draw as needed for renovations, paying interest only on what you use. HELOCs offer flexibility for upgrades over time.

FHA203(k)

FHA 203(k) loans let you wrap purchase price and renovation costs into a single mortgage. To qualify, repairs must total at least $5,000. 203(k) loans provide one easy financing solution.

Interest Rates for New Builds vs Renovations

When evaluating new construction versus renovated homes, interest rates are possibly the largest factor to consider.

Current Interest Rates

In general, current mortgage rates are similar whether you buy new construction or an existing home. National rates average around 7% for 30-year fixed mortgages as of August 2023. Shop lenders to find the best deal.

Loan Term Length

Shorter loan terms of 15 or 20 years usually have lower rates. Consider whether a lower rate over a shorter term outweighs the higher payment. Run the numbers to see what makes sense for your situation.

30 Year Fixed

(August 2023)

Interest Rate:

6.875% Interest

7.18% APR

20 Year Fixed

(August 2023)

Interest Rate:

6.75% Interest

7.162% APR

FHA 203(k)

(August 2023)

Interest Rate:

6.875% Interest

7.786% APR

(Statistics from Rocket Mortgage)

Deciding Between New vs Renovated

With the pros, cons, and financing options covered, here are final tips on deciding between new builds or renovated homes.

Budget

Crunch the numbers to see what purchase price and financing fits your budget. Factor in renovation costs if upgrading an existing home. Make sure to budget 20% extra for unexpected overages.

Lifestyle Needs

Consider your lifestyle and household needs over the next 5-10 years. New construction allows fully custom design, while existing homes offer character.

Willingness to Renovate

Honestly assess your appetite for renovation projects and DIY. Upgrading a home takes time and effort. If you want turnkey move-in ready, lean toward new construction.

Determining whether to buy new construction or renovate an existing home comes down to personal preference and lifestyle. For hands-on homeowners who don’t mind delayed gratification, renovating a starter home can be a fulfilling experience and solid investment. If you value convenience and modern amenities, choosing a brand new custom built home may be perfect for you. Carefully weigh all the variables before deciding which route fits your needs and budget best!

FAQ

[fusion_faq number_posts=”-1″ cats_slug=”buy-new-or-remodel” orderby=”date” order=”DESC” hide_on_mobile=”small-visibility,medium-visibility,large-visibility” title_color=”var(–awb-color8)” content_color=”var(–awb-color8)” /]

About the Author: David Perrotti

Dave has over 20 years of experience in the construction industry, is a Bestselling Home Improvement Author on Amazon, and constantly seeks to reinvent the remodeling industry. As a veteran of the Army and Air Force, Dave operates his business, Fine Home Contracting, on the core army values of loyalty, duty, respect, selfless service, honor, integrity, and personal courage.
By Published On: August 1st, 2023Categories: Home Improvement Contractor, Home Remodeling, New Construction0 Comments on The Great Debate: Buying a New Build vs Renovating a Starter Home

Share This Story, Choose Your Platform!

Related Posts

Flood Resources for Connecticut Homeowners

Flood Resources for Connecticut Homeowners

August 23rd, 2024
How Much Does a Home Addition Cost in Connecticut

How Much Does a Home Addition Cost in Connecticut

August 11th, 2024|0 Comments
How Much Does It Cost to Add a Second Story in Connecticut?

How Much Does It Cost to Add a Second Story in Connecticut?

August 7th, 2024
Transform Your Space: The Connecticut Homeowner’s Guide to Kitchen Renovation

Transform Your Space: The Connecticut Homeowner’s Guide to Kitchen Renovation

July 17th, 2024
High-End Paints Demystified: Brand and Feature Comparison

High-End Paints Demystified: Brand and Feature Comparison

July 15th, 2024
Soaking Tub Showdown: Luxury Brands Compared

Soaking Tub Showdown: Luxury Brands Compared

July 12th, 2024