Remodel vs. Rebuild: How do I know what to choose for my home in Phoenix, Scottsdale, and beyond?

So you got that home in Scottsdale, Phoenix, or nearby in Arizona back in the 80s, 90s, or 2000’s. It worked perfect back then for all of your needs. Now, not so much. It might be that bathroom, or kitchen, or that one awkward critical floor layout is finally starting to grind your gears to the point of no return. But you love where you live, so moving is off the table. How do you know when it’s right to remodel vs. rebuild? Where do you draw the line between these two approaches? We’ve got the ultimate quick guide below to help you decide.

When to remodel

When you need smaller scale changes than a rebuild

We have to get the obvious part out of the way: remodels are of course smaller scale and don’t require as much structural change to the house as a rebuild would. 

Now let me say this: there is a gray area some homeowners walk between a remodel vs. rebuild. Sometimes homeowners will leave just enough of the original structure in place to keep them qualifying for a renovation loan vs. a construction loan, but the key question in a remodel is are the house’s original bones getting fundamentally rebuilt or not. If not, you’re in remodel territory.

When you need more financing flexibility

Banks treat remodels very differently when it comes to financing than they would treat a rebuild. For example, if you’re borrowing to remodel or renovate, the bank knows that the building is still intact and that building is their collateral. But if you were rebuilding, their collateral becomes just the empty lot with no house on it anymore during the process.

A HELOC, or home equity line of credit, is the easiest route to go on securing financing for a remodel or renovation, where you are essentially borrowing against the equity of the home. There are also renovation loans you can get (Fannie Mae HomeStyle, FHA 203(k), and various bank "renovation mortgage" products) that lend to you against the after-renovation value rather than the current value - this is a great option in situations where the current equity isn’t enough to fund the work.

But all of these financing options are easier in a renovation or remodel, where the house isn’t getting torn to the ground and the banks collateral is still very much standing upright and growing in value.

When to rebuild

The “bones” are the main issue

Floor layouts that need to be stretched, low ceilings that need to be heightened, and chopped-up rooms can all indicate structural issues that require more of a rebuild than a renovation. Rebuilds really do look at pushing the boundaries of the fundamental structure of the home: if you can work within your current boundaries, don’t rebuild. But if the changes you need are structurally outside the realm of a renovation, a rebuild it is.

You need a completely rethought home but moving is out of the question

Your family may feel that the home needs a complete rethink but moving is off the table: you have neighbors you love, a golf membership, great views, the kids are in great schools, etc. Plus, moving means paying transfer costs, realtors, capital gains on a house that may have appreciated enormously, and other complications. 

These social connections and hidden costs really do matter. Take time to discuss with your partner all of the factors that could pop up in a moving situation. It may be worth customizing where you are and staying put.

You need a fundamental rethink but the lot is too valuable to leave behind

This piggybacks off of the previous point. During a fundamental rethink of your family’s living needs, moving may also be out of the question because your lot value is too high to walk away from. In many established areas, the lot is worth more than the house. A 1990s home on an acre in Paradise Valley or on a Camelback-view lot in Arcadia might be sitting on land that’s worth a few million on its own, and you can’t buy that lot anywhere else because there are no empty ones left. The value of the lot definitely plays a factor in the decision to rebuild - your family may determine that rebuilding