Unfortunately, our homes cannot grow with us. What may have initially worked fine for a single person, a young couple’s starter home, or a family with a newborn can quickly become too small as families expand and multiple generations live under one roof.
Remodeling and adding to your home can be one option to create more space. However, it can be costly, and the size of your property may prohibit you from creating the additional space you need. Under these circumstances, moving into a bigger home is the best solution. Michele Harmon Team is here to help you understand what needs to be considered if you are looking to upsize your home.
Consider Your Current Mortgage
As you start your journey to upsizing your home, you need to know where you are now to get where you are going. Let’s say you were conservative with your first home purchase and made a 20% down payment on a $125K house. Your mortgage payment is around $900 a month and it is a bit of a stretch for you, which makes you nervous about purchasing a larger home. However, one of the most amazing benefits of owning a home is equity. Equity is a term for how much your home is worth minus how much you owe on it. For example, if you originally purchased your home for $125K several years ago, and you discovered that your home has increased in value by $15K. Let’s imagine you still have $62K left to pay on your mortgage for this home. Subtract $62K from the value of your home. This will give you $78K in equity!
After setting aside a portion of this money for moving costs, you will have a potential profit of $65K to use on purchasing a larger home!
Do you believe your current home has built up significant equity? It can be hard to predict how much profit you will receive on your home due to frequently changing real estate trends and the varying prices among different locations. However, according to the National Association of REALTORS®, in 2019,home sellers earned a median of $60K more than what they originally paid for their home.
Know What You Can Afford
Upsizing your home is a great idea! When you start shopping around, be sure your search only includes homes that fit well within your overall financial plan and goals. Do your homework ahead of time so that you know the absolute highest price you can comfortably afford that allows wiggle room for emergencies and any unforeseen financial circumstances.
United States Senator, Elizabeth Warren recommends the 50/30/20 rule. This means that 50 percent or less of your monthly take-home pay should go toward fixed essential costs such as housing, car payments, student loan payments, utilities, or any other necessary expenses. 30 percent or less of your monthly take-home pay should go toward variable costs such as clothes, eating out, entertainment, and personal care. Finally, 20 percent or more of your take-home pay should go towards savings or extra debt payments. It is important to have a good idea of these costs when determining how much home you can afford.
Where Do You Need More Space?
When upsizing your home, consider the square footage, number of bedrooms, and bathrooms that will allow you to live more comfortably. In addition, it is great to take a critical approach of how your new space will be used. If you have young children or are expecting to have more in the future, it would make sense for you to focus on the number of bedrooms and bathrooms. If you have children who are getting ready to head off to college or are planning to start their own family, it may be best to prioritize the kitchen, dining room, living room, and outdoor area to prepare for big gatherings during the holidays.
Consider Moving Outward
If you are in need of more space in your home, but do not necessarily want a more expensive home, you may be able to get a lot more house for your money if you move further away from the city. Are you willing to move to a different neighborhood? This may be a difficult decision. However, it may be your best option for upsizing while avoiding a hefty price tag.
Consider the Resale Value
Upsizing can result in profit later if you choose your home and location wisely. You may think that once you find your new home, you will stay there forever. However, you may find yourself downsizing a few years from now. With all home purchases, consider your potential new home through the eyes of a future buyer. This includes doing research about what home buyers want. As you search for your new home, keep the latest trends in mind if you would like your new home to pay off further down the road.
Moving Up and Moving is Within Your Reach
If you are still living in your starter home, remember that these types of homes are in demand! You will most likely sell your home quickly and have plenty of time to choose your new home before moving out.
Michele Harmon Team can help you find a new home in a nice neighborhood with a great school district within your budget.For example, did you know that if you were to put $45K down on a $225K four-bedroom home at a 4 percent interest rate, you could put $20K of your equity into upgrading your new home AND keep your monthly payment around $1,600?
Are You Ready to Upsize Your Home?
Moving into a larger home can seem like a complicated task. However, you will gain confidence in the process while working with Michele Harmon Team. Michele Harmon Team will help you price and sell your home on your timeline and guide you on your search for your dream home. Michele Harmon Team provides a FREE staging consultation to our listings that need it, with the best marketing in the area. If you have outgrown your current home, call us at 713-818-1330 and we will be happy to help guide you towards securing a new home perfect for your family.
Are you curious about what your current home is worth? Click here to find the market value of your home for FREE!