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Should you move on, or should you stay and fix it? A few simple guidelines take some of the pain out of the wrenching buy-or-renovate decision.

Deciding to renovate or pull up stumps and buy anew is an agonising decision. Either way, the costs can be considerable. When weighing up the advantages of renovating versus moving it pays to do your sums and think carefully about your future needs.

Moving on: the hidden costs

It costs around $5,000 to buy a $120,000 house with a $100,000 home loan in Melbourne or Sydney. Add the costs of selling your home (conveyancing fees, estate agents commission and the like) and staying put begins to look more appealing.

Ask yourself whether it will be cheaper in the long run to buy a new house or renovate the old one. Other reasons to move include:

• More space, bigger garden
• Better schools, parks and community facilities
• Closer to grandparents/friends
• New lifestyle
• Cheaper housing
• Quieter neighbourhood

Before you decide to renovate, make sure you are not overcapitalising. An $80,000 renovation may solve your short-term accommodation needs but will it add value to your home? Consider the demographics of your neighbourhood, the style of housing and check out the sale prices of similar homes nearby.

The renovator's challenge

Once you've decided to renovate, be prepared for months of disruption and hard work. Renovating is never easy, but it can make a big difference to your lifestyle and the value of your home.

A general rule of thumb is never spend more than 25 per cent of the value of your house on renovations. Doing up bathrooms and kitchens is usually a safe bet. Simon and Barbara, both architects, wanted to update their kitchen before the new baby arrived. They spent $10,000 on a state-of-the art kitchen, but are confident the renovation will add $20,000 to the value of their house.

With all renovations it pays to choose classical, timeless design over more outlandish finishes. Matching or complementing your home's existing style and features is also advised.

Tip: Never spend more than 25 per cent of the value of your house on renovations.

A rough guide for home renovators

• It costs 50 per cent more to demolish a brick wall than timber
• It is cheaper to extend out than up
• Stairways cost about $3000 plus around $7000 for the space need to fit it.
• Swimming pools rarely add value
• Architects cost less than you think and can save time and money
• Get at least three quotes from reputable builders and check their work