Stretch goal into a dream house, good idea?

So I have a place that I've been in for 5 years and owned for 4 that's a fixer upper. I bought it dirt cheap direct from the owner and have done a ton of work (all new windows, electrical update, new hot tub, partial flooring, all new crawl space, etc, etc) but it still needs a lot (paint, flooring, updates). We have been working with a contractor to try and get it to be what we need (it's a 3 bed/2 bath 1750 sf) that we have plans and engineering to change to a 5 bed/2.5 bath 2250 sf) but it's been a bear to get things moving.

We looked at houses and we found a place that we absolutely love, but it's pricey! It's a 4 bed/3.75 bath (plus finished attic, office, and den) 3350sf. We would have to really stretch to get it, like get max $$$ for our place, sell the Cayenne, and maybe even sell the Boxster to have enough down.

So do we build on or sell and buy?

(Side note, my current interest rate is 2.125% and the current quotes are 5.5 ish % on a VA)

Do you have any idea what it would cost to make your place equivalent? Keeping that low interest rate would be a pretty high priority for me.

In reply to STM317 :

There's no amount. Our current plans are the best you can do without tearing it down and starting over. So the new place will be around 1000sf more even after the remodel, plus a bigger garage so I won't have to build a shop.

I wouldn't. My Spidey sense is telling me this whole fanatical house purchasing spree is rapidly coming to an end, and that house might be $5ok cheaper soon. 

Be sure to take the neighborhood into consideration. Is one of the houses in a better location? Better lot? Those are things you can't change. Is you current house typical of the neighborhood? Would adding 500sq. ft. make it an outlier? If so, while it would add value, it might not be proportional. Keep in mind that all construction is more expensive and takes longer right now. Unless you are in love with your current house, it might be better time and money wise to start over with what you want. Much like a project car. 

In reply to Javelin :

Has your house market been crazy like mine?

You say, "we'd have to sell the Cayanne and Boxster..." Can you do that quick enough and still have the new house on the market ?  With the fast pace at which houses are selling here I'd expect the sellers have accepted a cash offer before you even get the cars listed. 

If your current neighborhood is good, update the current house.

I see the market tanking and at least a mild recession hitting in q3.  I don't hate stretching on a house as long as your math works as they are a piggy bank with shingles.  But watch for the interest and financial impacts that will likely lower both homes.

AngryCorvair (Forum Supporter) said:

If your current neighborhood is good, update the current house.

Current neighborhood is great. Unincorporated county, 3 minute walk to the brand new elementary school, 1 minute drive to the interstate on ramp. 

Potential new house is a model home on a hill up in the high end area. Takes 10-15 minutes to get there from down here. 

Boost_Crazy said:

Be sure to take the neighborhood into consideration. Is one of the houses in a better location? Better lot? Those are things you can't change. Is you current house typical of the neighborhood? Would adding 500sq. ft. make it an outlier? If so, while it would add value, it might not be proportional. Keep in mind that all construction is more expensive and takes longer right now. Unless you are in love with your current house, it might be better time and money wise to start over with what you want. Much like a project car. 

Current house is on a true double lot, very much middle of the road build for the neighborhood. The area tops out with 5 bed/3 bath houses at 2500sf for $475k on postage stamp lots. If our update was finished we'd be a 5 bed/2.5 bath 2250sf plus have space for a shop or ADU. We have ~200k in equity "as-is". It's going to cost 100k to do the addition and likely raise the home value by the same, so that's a wash. 

In reply to John Welsh :

Our neighborhood is crazy because of the new school. Houses average 2 days on the market here. The potential new house is in a new build area that's maybe 1/3 full and slowed way down. It's been on the market 21 days with a 25k price drop already. 

If you're worried about future value, I wouldn't move to a neighborhood that's slowing down from one that on fire. Walk to school and 1 min to interstate will always be desirable. 

Going from 1750sf to 3350sf can be a bit of a shock. It's so much more work and everything takes more time and money to do. Just keeping the place clean takes literally twice the time. 
 

Going from 2.125% to 5.125% and increasing the principal (i assume?) is going to play hell on your monthly payment. Plus property taxes will be much higher. Look at it all with open eyes not rose tinted glasses. 
 

All that said, more space can be amazing. And like everyone my crystal ball is very cloudy but I have serious doubts about houses getting much cheaper. They might but people have pretty strong anchors to what they paid and what the houses are "worth" so short of being forced to sell I don't see much downward movement. Stagnation maybe. Loss in value due to inflation maybe. But not a collapse unless another shoe drops. 
 

Steve_Jones said:

If you're worried about future value, I wouldn't move to a neighborhood that's slowing down from one that on fire. Walk to school and 1 min to interstate will always be desirable. 

Not really worried about future value until the kids graduate school, so 10-12 years from now. You are correct on current house always being desirable though.

dculberson said:

Going from 1750sf to 3350sf can be a bit of a shock. It's so much more work and everything takes more time and money to do. Just keeping the place clean takes literally twice the time. 

 True. Current house is 1980 build, new house is 2005 though.

In reply to Javelin :

My 80s built bungalow made from tung and grove is a superior build to chipboard and cheap 2x4 on wide centres.

Just like a car , buy on quality of the build and condition not age. 

We went from a 2000 square foot raised ranch to a 2700 square foot contemporary colonial. We stretched our budget a little bit to do it, and I don't regret the house one bit. However, I wish we had considered the difference in maintenance between the two properties.  

Our current house takes infinitely more time and money than our old house to maintain. Simple roof vs. complex, vinyl siding vs. repainting every 5 years, longer driveway to snowblow/repave, more lawn to manage, brush to cut down, etc.  We're also in the process of replacing every window in our current house, as well. The same project in our old house would have been done years ago, at less than 1/4 the cost.

I don't think I would do anything differently, but I'd recommend looking at the two options from a maintenance time & cost factor before jumping.

In reply to Javelin :

How secure is your job, your future? 
     I did the same thing  in 1984.  Sold my house at the top of the then market. Bought a repossession at way below market rates.  It was a tear down which was good. I basically bought it for the land value.  
    Today that land is worth well over a million  and the new house I built adds a lot to that. 
   But it's been hard.   Almost 30 years of hard work and sacrifice.  The  recession of 2008 came darn close to costing me my home and all the equity I'd built.   
  While my life is secure now with  no further risk of loss.   There were several years where I was on the absolute edge of losing it all.    
   Life is like that, job, health, family, and many things you simply cannot plan for is part of the risk.  
     But if you succeed, make it your castle,  the comfort, rewards, satisfaction , make it all worth while.   
Just be aware nothing is for sure.  

I wouldn't buy a house right now around me, the prices are about 8 times what they were 2 years ago 

Plus, you don't want a house built in 2005, that was a "boom" time and they are built as cheaply as humanely possible so they could get max profit. I saw houses that were 3 feet out of square, plumbing not hooked up and draining into the crawl space and all sorts of other horrors. Your 1980 house is significantly better as 1slowvw mentioned before.

Personally I'm not a fan of "stretching"  for long term investments, too much can go wrong

I read that your current home is on a double lot. Sounds to me you have a great place for a perfect garage build and your close to all the important items.  Can't hire contractors? Leave it as it is or DIY the things you can.  Keeping up with "the Jones'es" to have the nicest home, don't bother.

In reply to MyMiatas :

It's not keeping up with anyone, it's having space for our 4 kids. Right now they share bedrooms and we have no extra space. It's do we spend 100k on this place and all the headache adding 2 rooms (and still not have much space) or do we use the equity to roll into something that meets our needs. 

Does your current home have a basement?  Could it (the basement) be an area that could be updated to rooms?   

If you can, buy the house you want, so you have time for other stuff. I'm 3+ years in on a home redo, and burnt out badly. I remember the days when there weren't projects hanging over my head, and I worked on stuff for fun.

84FSP said:

I see the market tanking and at least a mild recession hitting in q3.  I don't hate stretching on a house as long as your math works as they are a piggy bank with shingles.  But watch for the interest and financial impacts that will likely lower both homes.

I am crossing my fingers that you are right.  I am in Philadelphia as we speak.  Partly because I just want to enjoy the holiday weekend in my home town, and partly because my wife and I want to start looking into buying a house here that we can rent out until we're ready to retire or my kids are on their own.  We are not going to buy until the market corrects itself, which we are hoping is very soon.  Going to look at towns today.

Do not buy right now. Let the bubble burst.

Two weeks ago the market we are looking at (Smokey Mtn TN area) prices dropped 10-50k. I have not looked since as we are waiting to pull the trigger.