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Upsizing your home? Here’s what to consider

The decision to upsize your family home is often years in the planning and part of your long-term wealth strategy, but sometimes life can spring the change on you.

The work-from-home movement has encouraged many owners to seek more significant properties to take calls in peace and stop balancing their computers on the edge of the kitchen table. The arrival of a new baby can also force you to reconsider your space. 

But upsizing to a larger family home is also a significant financial decision as it commits you to a bigger mortgage, increased utility bills and higher rates and taxes.

The costs can be worth it. A larger home can be a better investment and offer long-term financial security. It will also allow you to cope with a growing family.

To successfully upsize, you need to be clear on the features you need or risk making an expensive mistake. It’s also essential to understand how far your finances will stretch, so you spend your time viewing only those homes within your reach. 

Dealing with the financial aspects of upsizing can be confronting. Here is a checklist of the issues you’ll need to address. Think of them as a framework to help you think about your move constructively and productively. 

How big is your budget? 

Check out the equity in your current loan, as this will be the foundation of your future borrowing. Some banks will lend up to 80% of the existing equity. For clarity, equity is the difference between the original size of your mortgage and the sum you’ve paid off. You don’t want to end up defaulting on your mortgage payments in the future.

Work with your lender or broker

It’s a great idea to speak to the experts rather than assume how much a bank might lend you. Brokers offer services that will help you understand the options that you have. They will compare the current rates and fees charged by different lenders, something that can be too tedious for you to do.

Get a pre-approval 

A pre-approval will allow you to make an offer on a home, or participate in an auction, knowing your lender will support you to a prescribed financial limit. Be aware that there’s a final approval process in which the lender will value the property you want to buy.

Can you cover upgrade costs? 

These will include stamp duty, refinancing costs, and fees for your agent, lawyer and conveyancer. Don’t forget you’ll need to pay building and pest inspectors.

Don’t forget higher running costs

These are inescapable. Larger homes require more heat, more cooling and more maintenance. The more space you have, the harder the upkeep will be. While it may seem nice to have a bigger home, you also have to think if you can handle the change in the financial demand of having one.

If you have plans of upsizing your home, but you have reservations, give us a call. We can help you assess your situation. And we will recommend great loan products that will suit your needs.