It’s not uncommon to find an elderly person in their 70s, 80s, or 90s who has lived in the same house their entire adult life. It used to be that you purchased a home for your young family and stayed in that house. Things have changed, though, and many families now make the choice to move every few years in order to move up in quality, size, or style.
Is it time for you to move up in the size of your house?
6 Things You Need to Think About
Moving up is something that has become quite common over the past couple of decades in America. If you’ve been in your current home for a few years, then you might be considering making the move up. But what do you need to know before proceeding?
Let’s take a look at some important tips and concepts discerning homeowners need to think about.
- What’s Your Primary Motivation?
The first thing you need to do is level with yourself and articulate your motivation for moving up. Are you doing it to keep up with the Joneses, or is it something that you really need/can afford?
When people are honest with themselves, they often discover that their desire to move up has nothing to do with their needs. All they’re doing is trying to keep up and put off an image of financial success. If you’re in this boat, you should take some time to think about what you’re doing. It’s ultimately your call, but you’ll find that a newer, better house will only satisfy you for a few months. Then, you’ll feel the need to move up again.
If you truly do need a new house – such as for more space or to be closer to work – then make sure you come back to these as you begin reviewing listings. It’s easy to forget about your original motivation once you’re in the thick of the search process.
- Remodels and Additions
If you’re looking for more space or newer features in your next home, you might not even need to move. It would help to run a cost analysis and look into the possibility of remodeling or adding to your existing house.
For example, if all you really want is another bedroom and bathroom to give your growing family some space, you might be able to build up or out on your existing home. In the end, this could save you thousands of dollars and prevent the hassle of moving and dealing with finances.
- The Five-Year Rule
Most people are content with a house for at least a couple of years. However, once year three rolls around, things often change, families grow in size, and stylistic preferences evolve. It’s at this point that a lot of homeowners think about moving. But as financial guru David Ning points out, it’s best to wait at least five years.
There are two primary reasons you need to wait at least five years. The first has to do with closing costs. Each time you go through closing, you have to pay a certain amount of money for the transaction. This may add up to thousands of dollars that you never get back.
The second big cost has to do with mortgage interest. “The way mortgages are structured, you pay much more interest in the first few years you own a house,” Ning explains. “Usually, it isn’t until you’re about five years into paying down your mortgage that you’ve made enough progress on the principal to make it a better deal than paying rent each month.”
When you wait at least five years, it usually makes sense to sell and a buy a new home. (Not always, but usually.)
- Future Costs and Expenses
Moving up in house doesn’t just cost you in terms of the monthly mortgage payment. Every time you move up in square footage, there are added costs that come into play. For example, utility bills cost more, property taxes may increase, there’s a need for more furniture, etc. Can you afford this?
- Existing Home: Keep or Sell?
If you do make the decision to move up in house, the next thing you have to think about is if you’re going to sell your existing home or hold onto it as a rental property. Most people choose to sell and roll the equity over into the next house, but it’s worth considering the alternative if you’re in a financial position to do so.
In order for you to hold onto the house, you’ll have to make enough money to qualify for two mortgages. You’ll also need to crunch the numbers and see what sort of capitalization rate you can get on the property. In all likelihood, you’ll probably want to sell.
- Forming the Right Team
When it comes time to sell your existing home and looking for a new one, you’ll want to assemble a qualified team who can save you money and help you find a good deal. While your best friend from high school might be a real estate agent, is he really who you want selling your house? Take this decision seriously and create a team of people who set you up for long-term financial success.
Contact Green Residential
At Green Residential, we take pride in helping Houston-area homeowners make smart real estate decisions for themselves and their families. If you’re looking to sell your current home, we have a team of experienced real estate professionals waiting to make the process as smooth as possible for you.
When you sell your home with Green Residential, we promise to save you a ton of money. Instead of charging the typical 3-percent commission that most Houston real estate agents charge, we work on a flat-rate fee that saves you thousands of dollars at the closing table.
For more information on how we can help you sell your home, feel free to contact us at your earliest convenience!