You thought you’d found your dream home, but now you’re wondering if upgrading your home is necessary so you can meet your current lifestyle more fully. While everyone’s situation is different, there are many reasons why homeowners consider upgrading from their current home:
Now that you’ve determined that you need to upsize, you need to figure out if now is a good time to do so. When weighing the pros and cons, keep the following considerations in mind:
Low interest rates often spark a spate of borrowing — and for good reason. You’ll pay less for your loan over its lifetime and enjoy lower monthly payments as well. This is especially attractive when it comes to upgrading to your dream house.
Your home is likely to be the single largest purchase you’ll ever make. If you can reduce the amount of your monthly payment and pay less over the lifetime of your loan, you’ll have more discretionary income to spend elsewhere.
Before you start looking at homes, spend some time going over your finances. Just because you want to purchase your dream house at this particular point in your life doesn’t mean that it’s a good idea financially. You want to make sure that buying a larger home isn’t going to threaten your financial security.
You’ll also need to show lenders that you have enough financial resources to easily make the monthly mortgage payments. This often means that you need to bring home about three times the amount of your mortgage every month.
One of the most important things to consider — that homeowners often don’t think about — is market conditions. If the market is in a slump, which means that prices are sharply declining, then it’s often called a buyer’s market.
If it’s a buyers market, you will have more power to negotiate and will likely be able to purchase more house for your money. If you can manage to couple a buyer’s market with low interest rates, you’ll find that you also have lower monthly mortgage payments.
In general, the longer you own your current home, the more equity you build up in it. Once your equity reaches the 20% mark, it’s the ideal time to trade up to a roomier abode.
You can take the equity from your current home and use it to make the down payment of your new house. In fact, many lenders offer more attractive rates and terms if you’re able to put a 20% down payment on a home.
The age-old question is: Should you sell your current home first before buying the house of your dreams or vice versa? Below are some pros and cons of each approach:
The pros of selling your home first:
Cons of selling your home first:
Purchasing your dream house offers you plenty of advantages — if you’re able to afford it.
Pros of buying your new home first:
Cons of buying your new home first:
If you are actively in the real estate market and are ready to buy a bigger house, there’s no better time to talk to us than now. Speak to the experts at Shore Financial and learn about your options for funding your home upgrade.
Disclaimer: This is general information only and should not be taken as financial advice. Please speak to a Shore financial planning professional before making a decision on your home loan.