Most anyone who has owned a home for a few years will at some point consider “upsizing” to something a bit bigger, a bit nicer, in a better area, and, almost always, more expensive. Here are three questions to consider before you pull the trigger:
- Is your desire to upsize a WANT or a NEED? Some folks just want a bigger, better home but do not contemplate the long-term effects on their financial plan. If yours is only a want, carefully consider the financial costs of that fleeting fancy – a bigger mortgage, higher property taxes, more items to repair and clean, more landscaping costs, higher utility bills, higher homeowner association dues, and, let’s not forget the added cost to furnish that extra space. Ask yourself: is my desire for a bigger home worth me working a few extra years before I retire?
- Does moving up to that bigger home fit into your CURRENT TIME HORIZON for where you want to be? If you think your next promotion will be taking you to a new city, or if you don’t think you’ll be in your new home for at least 5 years, perhaps “moving on up” should be put on the back burner. As we have seen over the past six years, we never know where exactly we are in the real estate cycle, approaching the top or leaving the bottom. Remember to consider all of the inputs to your financial plan when contemplating this transition. Ask yourself: am I sure a new home fits with my plan for my career?
- Do you have the TIME needed for this transaction? Even if you have already found your new home, do not forget about all the time you will have to spend between today and that first weekend of relaxation in your new abode. Getting your current home ready to sell, keeping it show-ready, and waiting on a solid offer may take weeks or months. Closing on the sale, closing on the buy, packing, moving, unpacking, setting up, arranging services: they all take time and may cause stress. And if you are like most, you probably have to keep performing in your day job throughout. Be careful not to get distracted from the rest of your financial well-being just to complete the transaction. Ask yourself: do I have enough time in my schedule to make this happen?
If you can honestly answer these questions and consider the impact on your situation, chances are your home upsizing won’t derail your overall financial plan.