By Richard Whitten - Money Expert at finder.com.au

As your family grows and your lifestyle changes, you might find your home isn't big enough anymore. You may need a third bedroom, extra living space or a bigger kitchen. But what's the right way to upgrade?

Homeowners looking to upgrade have three options to consider: selling your home and buying a better one, renovating your home, or knocking down the property and rebuilding completely. Here are the key benefits and downsides to each option.

Sell your property and buy a bigger one

Perhaps the most obvious option is to move into a better property rather than trying to improve your current home.

Pros

• Selling your current property means you can buy a new place that fits your lifestyle needs more closely. If you're dreaming big, why compromise by renovating?
• Buying a new property means you can avoid the discomfort and disruption that comes with a major renovation.

Cons

• You need to get your current home ready for sale, which involves a lot of cleaning and possibly some repairs too.
• Finding a new property can be a complex and time-consuming task.
• You need to get the timing right so that you can sell your home and move into a new one.

Things to look out for

Buying and selling a house costs money. You will have to pay stamp duty, conveyancing fees and moving costs, not to mention any agent costs and commissions. While these costs may work out cheaper than renovating they are still worth keeping in mind.

Renovate your current property

For some homeowners a renovation represents the best of both worlds: you can upgrade your home without needing to move into a new property.

Pros

• Renovating your current home allows you to keep living in your family home while making improvements to suit your needs.
• If you've built up equity in your property, you can use a line of credit to fund your renovations.
• Upgrading your property usually increases its value if you do decide to sell.

Cons

• Renovations have their limits. You can build a brand new kitchen or bathroom, but the space you live in could limit the extent of an upgrade.
• Major renovations can be disruptive and expensive. You may even need to move out while renovations are underway, which adds to your costs and is very inconvenient.
• If you live in an apartment or townhouse, you're even more limited by space, by-laws and the floor space.

If you have serious dreams of a much better or bigger living situation, you might want to consider buying a whole new home.

Knockdown your home and rebuild

A third option is the knockdown rebuild. You keep the land but build a totally new house on top of it.

Pros

• You can keep living on your property by keeping the land and knocking down the house. This way you can completely redesign your house while staying right where you are.
• Land represents the major portion of a property's value. Rebuilding a home on land you own could be cheaper than buying an entirely new property.

Cons

• You will need somewhere else to live during the construction process. This could cost you many thousands of dollars in rent over several months or longer, depending on how the construction progresses.
• If you have a small block of land then it might be difficult to create the home of your dreams. You could overcome space constraints with careful design, but you might be better off buying a bigger place.
• Since you’ll need development application approval from your local council, you may want to check if your current home comes under any building rules that prevent knockdown or removal early on.

How you decide to upgrade ultimately comes down to your finances and your personal preferences. It's always important to do your research and calculate the costs as accurately as you can. And speaking to an expert at Great Southern Bank about your options is a good way to start.

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