Today’s low home prices and low interest rates are making home ownership more attractive to many. And, while first time home buyers are getting in on the act, they aren’t the only would-be buyers interested in making a home purchase. Plenty of current home owners are considering upgrading to a larger home.
In many markets, home owners are looking at homes in the next price range up as good buys, since foreclosures and a slow market are resulting in good deals. But, as tempting as it is to upgrade to a larger home, is it really a good idea? Here are some things to consider before upgrading to a larger home:
Why Do You Want to Make the Move to a Larger House?
Consider your situation. Sure, a bigger, nicer house is a plus, but is your decision based on some sort of notion of status? If your main motivation is to impress others with your bigger home, it may not be the best reason. However, if your family is starting to outgrow your current home, or if you believe that you would enjoy a better quality of life in a nicer home, then it might worth considering making the move.
What’s the Situation with Your Current Home?
The biggest issue with upgrading to a larger house is that you still have to sell your current home. Consider the market in your area. How long is the home likely to be on the market? Are you getting a good enough deal on the larger home to make up for any price cuts you will have to make to sell your current home in a timely manner? Another concern is that your current home may not yield enough of a down payment, due to its own home value issues. If your current home is underwater, or if getting approved for the newer home depends on selling your current house, you may not even have the option of upgrading to a larger house.
Are You Prepared for the Costs of Moving Up?
Before you decide to upgrade to a larger home, consider the additional costs. Not only do you have to think about an increased mortgage payment, but your home insurance and property taxes will increase your costs as well. On top of that, there are costs associated with moving, and you may need to buy more furniture, or make changes to the home. Utilities in larger homes are more expensive, as is yard care and home maintenance. If the home has been foreclosed on, there may be some home repairs necessary. You may not be prepared for the additional costs associated with a bigger home.
Can You Handle the Home if it Doesn’t Appreciate?
Taking on extra debt is always something to be approached with caution — especially if you are planning on upgrading to a larger home. Many people feel that a larger home would get more bang for the leveraged buck, since the appreciation would make up for it. But, even if you buy at the bottom of the market, there is no guaranty that your home will appreciate in value at the rate you expect. As we saw not too long ago, the real estate market crashes, just like everything else. If you are banking too much on a larger home as an investment, you might be disappointed. Consider upgrading as a purchase, rather than an investment likely to yield big returns.
