Is It Time To Go Bigger?
This week is a big week at Focused on Finance HQ; we welcomed a little girl to our family! What started out as just my wife and I has grown double in the last 5 years, and although our home was bought with the purpose of starting and growing our family, it
made me think about so many of my clients who come to see me wishing to 'upsize'. Upsizing, as opposed to downsizing, is just that - increasing the size of the home you live in to accommodate more people living in it or simply the need for more space. Whilst many people go down the (highly stressful) renovation road to increase their living space, with purchase prices and interest rates relatively low in the South West, there has actually never been a better time to look at purchasing a bigger home than now.
Whilst it's important to always obtain professional advice from your broker or accountant before you make such a significant life decision, some factors you can consider beforehand include:
Can We Afford It?
It's important to note that upsizing can come at a significant cost. Smaller is usually cheaper, and depending on the equity you have built in your home and the amount you can sell it for, you may find that staying put is more financially viable, especially if one of you is not working as much to care for your growing family.
It is also important to consider that larger homes have larger expenses. Power, water, maintenance, home insurance, even furnishing a bigger home are more expensive with metres squared.
What Are The Costs Involved?
Upsizing can work out to be quite an expensive exercise once you factor in the costs involved. There are expenses such as stamp duty, refinancing, agent fees, legal and conveyancing fees, building and pest inspection reports etc. Not to mention that if you are selling your current property, you will more than likely have to do some work to get the house ready for sale, engage the services of a selling agent, removalists fees etc. On the flip side, renovating your home is a lot more costly (but can add notable value) and staying in a cramped, small home can be very stressful. Weigh it up!
Can We Keep Our Current Home As An Investment Property?
You can, but you need to make sure you are financially prepared to pay two mortgages, as well as possible maintenance and repair costs should anything occur in your rental property and property management fees if you wish to engage a Property Manager. Be sure to consult your broker on this, as there are other legal obligations and taxes to pay on rental properties.
What Happens If I Buy But Can't Sell?
This is a common issue when people wish to sell one property and buy another. Will you sell your home first then buy, or buy your new home first then sell? You may not be able to buy a new property if you don’t sell your current home first, but what happens if you do sell and are unable to buy the next place in time? Timing is important and contingency plans are vital, especially if you have little ones needing a home in between your buying and selling plans.
What Are My Long Term Goals?
If you're clear on your long term goals for your new property, choosing the right one will be a lot simpler. For example, clients of mine have SEVEN (ugh!) kids and wanted to purchase their home to accommodate them all, from the toddler to the teenagers, but were also aware that (hopefully) half this mob would be moved out in the next 5-7 years. They sacrificed a bigger yard for a bigger house and bought a place that the kids could stay in longer if they needed to, but that they could convert to functional space for themselves later on in life (or for babysitting all those grandkids!). Making sure you consider what you'll need in the future, not just now, will ensure you find the best fit for your family.
With every big financial decision, it is always best to seek the advice of a professional. Focused on Finance have seen it all when it comes to unique lending criteria, family structures, income streams and financial goals. If you are considering upsizing your home, give us a call today!
