Sixty-nine percent of people in small homes say they would like larger accommodations. Maybe your kids are getting older and more space would keep bickering to a minimum. Or maybe you are planning to welcome an in-law or two into your home. The decision to upsize is an important one, and not something that should be taken lightly.
While you will have more space for visitors and less cramping for your family, there are factors that you will need to consider.
Let’s take a look at some important considerations.
1. Make A Plan
You need to think about your reasons for upsizing before committing to the financial move. If, for example, your current home is cluttered, are there other ways you could make the most out of your space?
A larger home will generally cost you more money, and you may need to move further from the city center in order to afford one. Are you prepared for a longer commute? Or do you have an improved financial situation that will allow you to take on a bigger monthly mortgage?
If your current home is too small for your family, there is a good chance that home prices will increase over the next few years. If you plan to remain in your new home for at least five years and don’t plan on having any major income changes soon, it may be worth it to purchase something now.
Make sure you are smart about your space when purchasing a new home.
If it has more bedrooms, are they big enough? Is there space for the kids to hang out with their friends, or for grandma to have privacy? You don’t want to stretch your budget to purchase a property that still doesn’t make your family comfortable.
You should also consider the amount of equity you have acquired in your current home before looking for something new. Most people need to sell their current home before they purchase unless they are comfortable carrying two mortgages.
Talk to an experienced agent about what you can reasonably expect to get for your home. After paying realtor fees and moving expenses, how much can you reasonably make on a downpayment?
2. Money Talk
The right mortgage lender will review your assets and liabilities to make sure you won’t exceed the maximum debt-to-income ratio when you purchase. The higher your credit score is, the better interest rate you can get.
You will want to consider long-term costs as well as the price of the home. Going up in square footage, for example, could mean higher property taxes.
Your property tax is based upon the fair market value of your home, as well as taxes levied by state and local governments. These are allocated to schools, public safety, and infrastructure. Research your prospective school district carefully to determine if your taxes will be worth it.
You will probably also be looking at a higher utility bill when you upsize. Your phone, cable, and Internet bills will probably stay the same.
Some utility costs, however, will increase with square footage. This includes your gas and electric bills. You will also want to think about water, sewer, and recycling fees.
To get a good idea of what your utility bills may look like, you can call the utility company currently servicing the home you are considering. They can give you historical data about the costs of utilities in the residence over the years.
You should also get a few different quotes for homeowner’s insurance. In many states, mortgage lenders will not allow you to close on a home without it.
3. And More Money
You won’t know the exact condition of your home until after inspection, but you will likely be paying more in maintenance for a larger home. This is especially true if you are moving from a co-op or condo into a house.
You will need to provide or hire landscaping services and maintain the outside property of the home. Gutters will need to be cleaned and shrubs will have to get planted.
Indoor cleaning is difficult for some families where both spouses work. Consider the cost of a regular cleaning service if you do not think you will have the time.
You will also need more furniture for a larger home. While you don’t have to do it all at once, it can be smart to factor in the cost of furnishing, painting, and decorating each room before you purchase.
4. Dive Right In
Do some calculations with your mortgage lender and determine what you can honestly afford before upsizing. You do not want to end up “house poor” and unable to spend on things you need or want.
If your current situation is really unworkable and you will be able to afford a sizable downpayment on your new home, it may be time to make the move.
Set a budget and look for a good deal. You may want to target homes that are below budget and/or require only a few simple upgrades.
Think about where you will need the space most as you look. Do you need larger bedrooms or an eat-in kitchen? Will your children leave the nest at eighteen or will they be sticking around into their 20’s?
The right house for your friend’s family is probably not the right one for you. But your dream home is out there somewhere, and you will find it with a little time and patience.
The Right Time To Upsize
The decision to upsize is different for everyone. If your family, budget, and heart are ready, it is time to take the plunge!
For more information on mortgage lending, contact us today!