Are you starting to outgrow your house? Perhaps you feel like it is in need of a facelift but you don’t know if an overhaul is worth the expense.

Many homeowners come to a crossroad after a few years of living in their home, particularly if they have added to their family. They find themselves faced with a choice –  selling to buy a property that better suits their needs or staying put and calling in the home renovation experts.

If you are leaning towards moving to a bigger or a different house, it is important to take into account the costs involved. As well as the price of working with an agent to sell your home for its maximum value, you will need to pay several thousand dollars in stamp duty on your next purchase. There are also building inspection fees, legal fees and the cost of physically moving all your belongings. A move could also result in higher annual council rates, depending on where you relocate to.

The choice to stay put and renovate is also going to cost you. Before you make the decision, it is a good idea to get your property valued and also to get a feel for the top price of a home in your suburb. Renovating means a risk of ‘overcapitalising’. Spend too much on your renovations and you could end up with a home that is worth more than anyone would be willing to pay for it.

The overall condition of your home also needs to be taken into account before you venture down the renovation path. Adding an extra bathroom or bedroom might not seem like a major expense, however bringing in the builders could result in the uncovering of hidden structural or wiring problems. Before you know it you could have major works in progress.

Another thing to think about when renovating is council regulations. You might be dreaming of that second story, but you will have to first apply for approval from the council and in some cases, your neighbours. This costs money and also takes time, potentially sending you right back to the drawing board. If you’re in a hurry to have a bigger place, you might find that you are better off relocating to a new home that is ready and waiting for you to move in.

Finally, renovating might mean you have to move out and rent while still paying your mortgage – another expense to consider.

In both cases, examining your finances is a key step. You need to know how much you can afford to borrow and what you can pay off. There are different types of loans that will apply to exactly what you decide to do, so have a discussion with your local lending specialist. The right lending specialist will also be able to offer you local area property market reports or link you to an estimated market value post renovation. They will be able to give you clear advice that will help you to make the right decision.