There are many reasons for upsizing your home, and all of them valid. You may be a couple in a one bedroom apartment who are having your first child; growing your family; starting a business and want to work from home, or you may have an elderly parent moving in to your home. There are all sorts of reasons why people make the decision to buy a larger property and take on the larger mortgage.
However, the questions linger: can you really afford this, is it a financially beneficial decision in the long run and is there a risk that upsizing your home will place you closer to the threat of mortgage stress? If so, are there alternatives to upsizing?
Tying up your money in a larger mortgage may not be entirely beneficial if you have to move further away from work or from the city, which enjoys more intense capital growth. Secondly, will a larger house be harder to sell than a midsize property that caters to both couples, investors and families? There are also other costs associated with buying a larger house: more space to fill, higher utility costs, more maintenance required.
Have you considered these alternatives to upsizing your home?
- If you are thinking of upsizing your home to create room for a new business, consider renting a studio space with other entrepreneurs/business owners. You can deduct your parking expenses as well as office expenses.
- For parents who think they need to expand for the kids: jot down how long you believe your kids can co-inhabit the one bedroom. Once the first child reaches those teenage years, upsizing your home isn’t always the only option. Can you extend the bedroom, sacrificing on living space elsewhere? Consider placing some form of separation in the shared bedroom using furniture, such as a shelving unit, so that you don’t have to provide a bedroom each for your kids, but they still feel a sense of ownership over their space.
- Invest in a high-quality sofa bed rather than worry about having a guest room. For when guests do stay, can this space be cordoned off using a ceiling to floor divider that can be stored when not in use?
- What renovations can you do? Remember, a common piece of advice is you should not spend above 10% of the value of your home on renovations, to avoid the chance that you won’t get this back in the resale of the property. If you intend to stay longer in the property, however, you will have capital growth on the value of your land added to any value you create in your renovations. This is especially true if you have a smaller property within an area that enjoys stronger capital growth than any area in which you could afford a larger home. Read more about whether to renovate or not.
- Reassess your lifestyle. If you are upsizing to increase your space for clothing or you want a larger backyard, perhaps you it is not your current home that is restrictive but your lifestyle and attitude towards your possessions. If there is money to be saved and made through stronger capital growth in the current house, then sacrificing on certain luxuries may be worthwhile, especially if it means you will be able to afford a better and larger house in the future. Secondly, can money saved in not upsizing be used in other investments, savings measures and your own lifestyle?