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Upsizing Your Home
over 1 year ago
Upsizing Your Home

1. How much can you afford to borrow?

There are many factors which affect how much you can afford to borrow, including your annual income, monthly expenses, number of dependents and the proposed term of the loan.

Online mortgage calculators are a handy tool for estimating your borrowing power, but Tovey says the only way to know for sure is to speak with your lender about your personal situation. Planning to upsize can also provide an opportunity to review your finances.

“As well as thinking about how much you can borrow, consider if it’s the right time to refinance or consolidate your debt, and look at whether your current banking structure is still right for you,” Tovey says.

2. What are your objectives?

Before upsizing, Tovey says it’s wise to think about your long-term property goals; is it a property being purchased with lifestyle as the priority or is it being bought as an investment from which you want to profit?

“While some people buy a home or choose an area with lifestyle in mind, others are looking for a financial return in the future when they decide to sell,” says Tovey.

“By understanding what your goals are from the beginning, you’ll stand a better chance of picking the right property that can meet your current, as well as future, needs.”

3. Have you considered maintenance and renovation costs?

A larger property inevitably comes with higher costs in terms of maintenance, property taxes, utilities and home insurance, so be sure to include these factors in your decision to buy a larger property. Another cost to consider is whether any renovations will be needed to make this new property your ideal home.

A popular alternative to moving can be renovating or extending your existing home. This can be done by accessing the equity in your home loan or extending your loan and may work out cheaper than moving house. However, it is important to avoid over-capitalising – which means spending more on the improvements than the potential profit the renovation could bring if you were to sell your property.

4. What other costs are involved in upsizing?

To make sure there are no unwanted surprises at settlement time, it’s important to keep in mind the other costs of upsizing and moving house.

Stamp duty is one of the biggest costs of buying a new home.

“Stamp duty can be a significant and often forgotten cost when buying a new home, which adds to the price tag of your property. Stamp duty is most commonly payable on or before settlement, so be sure to factor it into your home buying budget,” says Tovey.

If you’re borrowing more than 80 per cent of the property’s value, you may also need to factor in Lenders’ Mortgage Insurance.

And don’t forget moving costs, the cost to transfer utilities, and whether you plan to purchase new furniture or fittings to suit your new space.

5. Can you handle a ‘lag’ between buying your new house & selling your old house?

While in a perfect world you would have a buyer for your current home before buying another, it doesn’t always happen that way. If you’re in a situation where you’ve found your dream home but haven’t yet sold your existing property, your lender can help you explore different options, which may include getting a bridging loan.

“Because there are so many variables that can impact your decision to upsize, be sure to consult with a mortgage provider or financial expert to help you review your finances and budget, depending on your personal circumstances,

“They should be able to help you review your finances and budget and determine how much you can borrow, allowing the decision and the transition to be as smooth as possible.”