Making sure your growing family has enough space to continue to grow by upsizing your home is exciting but like anything that costs money, and it can be a little stressful too. Before you make any life changing decisions, it’s a good idea to know what you’re up against first.
Well take you through everything you should consider before starting the journey to buy a bigger home.
How much money can you borrow
Knowing how much you can borrow will give you a good idea of how much you can afford and where you can buy. Talk to your lender to see what they can do for you but also shop around. You can use a Home Loans calculator to get a quick estimate of how much you could borrow.
You’ll need to make sure you’ll be able to keep up with your new monthly repayments.
The costs of splurging on a bigger home
Buying a bigger family home – your forever home – is an exciting time for you and your growing family. Before making any big decisions, make sure you’ve considered all the costs and worked out where you might be able to save. For example, perhaps you can borrow a truck, instead of paying for a removalist. There are some things you can’t avoid, like stamp duty, but other areas where you may be able to cut costs. Here are some of the costs we think you should add to your budget:
Home loan repayments
Loan fees (if you break your loan or choose to refinance)
Real estate agent fees
Legal and conveyancing fees
Building and pest inspection reports
Removalists and moving boxes
Higher electricity and other utility bills
And new furniture for the extra rooms.
You can’t put a price on your time, but you’ll need to account for the time you spend looking at homes and planning your move.
Selling your home or keeping it as an investment
If you can afford to keep your home and buy something new, you may want to consider turning your current place into an investment property. Keep in mind, you’ll be paying two mortgages and investment loans often have higher interest rates. But there’s an upside to owning an investment home too, such as tax benefits and an extra income.
Using equity to buy
Equity is the difference between what your bank has valued your home and the amount remaining on your mortgage. If your bank has valued your home at $1m and you only have $300,000 left to pay on your loan, then your equity is $700,000.
If you’re wondering how, you can use your equity, there are a few things you can do with it:
Buy your forever home – if you sell your current home, you'll know exactly how much money you’ll have to put towards your brand-new forever home
Give your home a makeover – instead of selling, you could borrow back some of your equity to pay for a home renovation
Become a property investor – use your equity to put towards your new home and turn your current home into an investment property
Renovating instead of selling
Buying a new home can be costly and sometimes, investing money into the home you already own can be more financially viable. Make sure you do your research, and get some plans drawn up and quotes from builders. The time and effort of renovating might not be for you.
There’s a lot to consider before upsizing. While there are plenty of benefits like more space for the kids and guests, the financial impact could end up being all too much. If you’re unsure what’s best for your family, chat to one of True Home Loans experts about your options.
Article supplied by True Savings.