You love your home. The location is perfect for your commute to work. Your children attend good schools in the neighborhood. Shopping is convenient. You've made friends and belong to community associations that are meaningful to you. Life would be perfect if only you had another bedroom and bathroom for your growing family.

Whatever your new space requirements, you may be wondering whether you should move to a new house or remodel the house you already own.

Move or Remodel?
The decision to move or remodel comes down to calculating the total costs of moving and compare them to the total costs of remodeling. Don't forget that you will recover some of your investment when you resell your home. And don't forget the emotional comfort of not having to uproot your family.

According to the National Homeowner Foundation, you could expect to pay at least 10 percent of the current value of your home to sell your home and buy another one. In addition to that 10 percent, you would also have to pay to move your household furnishings. There are also costs involved in decorating your new house with new paint, wallpaper, window treatments, and so forth.

What do you want to accomplish with remodeling?
When you are done remodeling, what will you have accomplished? Before you begin to get estimates, consider these outcomes.

• How will the new space be used? A new bathroom or upgraded kitchen is easy to understand. At other times you need to think more broadly. When you refinish a basement to add space for recreation and storage, you may also want to include a bedroom/bathroom suite for older children or guests, or a wet bar for entertaining. Try to include all possible usage ideas from the beginning.
  

• How many people will use the space? Think about structural decisions, such as doorways and access features. Consider furnishings-for example, the need to upgrade carpeting under high-traffic areas.
  

• What style or architecture do you want? If your project is designed to complement the style of your home, your house will look larger. Before you experiment with other styles, consider how future buyers might view your choices. When in doubt, get professional advice.
  

• How can you determine the size of your remodeling project? You want to maximize the size of your project and minimize the expense. The cost of remodeling is based not only on space, but also on the requirements for the foundation, plumbing, heating/ventilation/air conditioning (HVAC) system, ceiling trusses, and windows.
  

• Where will your project be located? You should consider zoning, property boundaries, and other structures, including septic fields, on your property. If you are uncertain about locating your project, be sure to consult a professional.

Selecting a Contractor
How do you select a good remodeler (contractor)? Begin your search for a builder by asking your family, friends, and co-workers for recommendations. Other good sources of recommendations include lenders, real estate agents, and subcontractors. Develop a system for evaluating builders. The following topics should be part of your evaluation:

• Licensure and insurance: Your builder must have all appropriate credentials. Some states require that builders be registered as well as licensed. These certificates of credentials indicate that your builder has passed exams of proficiency. Do not use a builder who cannot provide proof of insurance coverage. The builder must be able to verify that his subcontractors are fully insured. Ask for your builder's registration and license numbers, and then call your local jurisdiction to verify them.
  

• References: Your builder should provide you with names and contact information for at least three references. Be sure you follow up and call these references. Ask to visit references, or drive by their property, to see completed projects.
  

• Current project visitations: Any builder you use should let you visit projects under construction. Site visits are a critical component to making a choice of contractor. You can make judgments regarding quality of work and attention to safety and neatness during a construction project.
  

• Cost of project: Find a builder who will work with you to identify cost-saving strategies. For example, a builder could suggest that you reduce overall square footage by "borrowing" space from a closet adjacent to the project area.
  

• Flexibility with appliances: It is helpful to work with a builder who will allow you to select the appliances that fit your needs and budget. This will ensure that you get the appliances you want, and perhaps save money on your selection of features and model.
  

• Timing of project: Ask when your project will be scheduled. Ask how many projects like yours have been completed in the past 12 months. Check resources, such as http://www.remodelingonline.com, for average construction time for various types of remodeling projects. Use that knowledge to assess your builder's projected timeline for completion.
  

• Architectural drawings: Save costs by choosing a builder who can do the architectural drawings (or has a relationship with someone who does.)
  

• "Chemistry" and confidence in builder: It's important to have a good working relationship with your builder. The relationship goes on past the scheduled completion date of the project. You will want to have your builder take care of "things that are not quite right" even after the project is completed.

What should your contract include?
Once you have selected a builder for your project, your next step is to make sure your contract is clear and complete. Your contract should include the following items:

• Contractor's identification: Name, address, telephone number, and license number (if applicable).
  

• Scope of work: This section details the specific nature of the job, drawings/ floor plans, materials used, protection of personal property surrounding the work site, and clean-up during and after the job. Your signature should be on all plans included with the scope of work.
  

• Timeline: Start date and completion date.
  

• Permits: In most instances, a permit is required if structural work is being done on your home, or if the basic living area of your home is going to be changed. For example, a permit would be required if you plan to refinish your basement, or add a sunroom to your home.
  
  Your builder should acquire the permit for your remodeling project. Your builder knows how to apply for permits and understands fees and all that is required to be in compliance. Also, the person who applies for the permit is responsible for ensuring compliance with building codes. That is one of the primary reasons you are hiring a professional rather than assuming the project as a "do-it-yourself" activity.

• Cost and payment schedule: Be certain that all financial terms are clearly detailed in the contract. The total price, payment schedule, and cancellation penalty should be clearly written in the contract. Down payments are negotiable, but can be as much as 33 percent of the total cost. Get a receipt of payment. Be honest with the builder as to what your budget will allow for the project. Your builder is more apt to work with your budget if you are open about it.
  

• Change orders: Your contract must clearly spell out how change orders are to be handled. For your own protection, all change orders must be in writing and signed by you and your builder. The change order should include the change in price and added time to the overall project.
  

• Warranties: Your contract should include a warranty covering materials and workmanship for at least one year. All warranties for materials and appliances should be clear and specific. Ask your builder for a detailed list of what is covered by a warranty, and how to handle a claim should something go wrong.
  

• Penalties for the builder being late: While this sounds like a good idea, be aware that states that allow penalties for being late also require a bonus for being early.
  

• Affidavit of final release or lien waivers: Before you make the final payment on your remodeling project, ask for your builder's affidavit of final release or final lien waivers from all subcontractors or suppliers involved with your project. This will protect you from any subcontractors or suppliers who try to make you liable in the event that your builder fails to pay them.
  

• Final payment—your leverage: This is your builder's profit. Your contract must stipulate that you hold this amount, perhaps 5 to 10 percent of the total cost, until completion of the project. This way you are guaranteed satisfaction.

What are your choices of materials?
Use the Remodeling worksheet to itemize options and choices. You will have the opportunity to select standard or upgraded materials. Choose standard materials if you know they will provide an acceptable level of quality and performance for the price. Consider upgrades when there is a definite performance improvement, such as for energy efficiency.

Financing your remodeling project
You have several options to consider for financing your remodeling project.

• Home equity loan: A home equity loan (or second mortgage) is the most popular type of loan for home improvement because the interest is tax-deductible and rates are competitive. A home equity loan is a one-time lump-sum withdrawal of an agreed-upon amount of a loan. Monthly payments include a fixed interest rate.
  

• Home equity line of credit: A line of credit gives you a maximum amount of money you can draw upon during the course of your project. You will benefit from the flexible nature of this kind of loan because remodeling expenses vary over the timeline of the project. Interest rates on home equity lines of credit are usually tied to the prime rate and thus will vary frequently as the prime rate changes.
  

• Refinance your current home: If interest rates are dropping or low, this could be your best option. Refinancing your home means you'll have a larger mortgage to pay off your existing mortgage. You can then use the excess funds to pay for your remodeling project. Assess the costs carefully, because refinancing often costs 3-5 percent of the total loan amount and approval time can be lengthy. If you were already planning to refinance because of lower interest rates, this option might make sense.
  

• Savings/cash: If you use cash, you use funds that could be earning interest in other investment accounts that provide a higher return than the interest you would pay on a loan. You lose the use of that cash for hardship or even vacation needs. You also lose a tax deduction when you pay with cash. Remember, when you make payments on a home equity, second mortgage, or refinanced loan, your interest is tax-deductible. It would be better to use the cash to purchase a car or other consumer product.

Is remodeling worth it when you sell?
Remodeling your basement, bath, master bedroom, or kitchen could enhance the value of your home and enable you to recoup a significant percentage of the cost of the remodeling project. There is data, by region of the county, to support the value of typical remodeling projects. According to Remodeling’s Online 2006 Annual Survey, on average you can expect to recover the following percentage of your investment in your remodeling projects:

What pitfalls should you expect?
No matter how well you plan, you may discover deficiencies in your existing home that need to be fixed before you can proceed with the project. Because pitfalls arise unexpectedly, you would be wise at the outset of your project to set aside 5 percent or more of the cost of your project to be available in the event of these unforeseen—but very common—circumstances. Two types of possible deficiencies are:

1. Structural deficiencies: Often remodeling a home uncovers problems with wiring, plumbing, heating/ventilation/air conditioning, or code issues. If your contract was carefully drafted and you have all of your permits, your builder will alert you to these deficiencies immediately and, through a change-order process, you will agree on how and when the deficiencies will be corrected and how to keep the project on track.
   

2. Environmental deficiencies: You also can run into problems like radon and other environmental hazards. It is wise, but not always feasible, to test for these substances before you begin your project. A well-drafted contract will protect you and help to minimize the unanticipated expense that such deficiencies will require.

Why Have a Final Walk-through?
During your final walk-through, you evaluate whether the remodeling project meets your expectations. Remember, your final payment to your builder is due once the project meets your satisfaction. Here are some items to look for during your final walk-through:

• Check from top to bottom: Note every detail from ceiling to floor.

• Expensive items: Pay special attention to expensive items.

• Working order: Check out all appliances, plumbing, electrical switches,

• Clean-up: The builder should have cleaned up the worksite.

• Final lien waivers or affidavit of final release: Make sure you have them all before you make your final payment.

When the project is complete, call your insurance agent. Because your addition probably added to the value of your home, there may be an increase in your home insurance premium. Also, depending on the scope of your remodeling project, it is possible that your property tax assessment may increase.