by Maurie Backman | Jan. 23, 2021
Before you upsize, consider these important points.
If you've been thinking of ditching your starter home and buying a larger property, now may be a good time to do so. Mortgage rates are sitting at historic lows, which means you have a real opportunity to lock in affordable monthly payments on a home loan. But before you start contacting lenders and submitting those mortgage applications, think about whether a larger home is a smart idea for you. Specifically, these four questions can help you make your decision.
The more money you spend on a home, the less you'll have available to spend on other things. (For the sake of this article, we're assuming that a larger home is more expensive, even though that's technically not always the case.) If you're the type who enjoys travel or dining out, a more expensive mortgage payment could make it harder to do those things. Also, the more you spend on a home, the more difficult it will be to meet other financial goals you might have, like saving for retirement. Think about what you'll have to give up to buy a larger home and make sure it's worth it.
The larger your home, the higher your property tax bill is likely to be. Property taxes aren't universal or arbitrary. Rather, they're calculated by taking your city's tax rate and multiplying it by the assessed value of your home. If you're staying in the same neighborhood but are moving from 1,800 square feet to 3,000, it stands to reason that your new home will be worth more than your old one, so your taxes will reflect that in the form of a higher bill. (You should expect your homeowners insurance, heating, and cooling costs to rise, too, but a higher property tax bill is more likely to catch you off guard.)
Your goal in buying a larger home probably isn't to have several empty rooms on hand. Rather, you'll want or need to fill those rooms with stuff -- furniture, artwork, or even toys, if you're a parent. But those items will cost money, so think about whether you really need that added space, because it could serve as additional temptation to spend.
This is one of the top lenders we've used personally to secure big savings. No commissions, no origination fee, low rates. Get a loan estimate instantly and $150 off closing costs.
A larger home is apt to cost you more money, but you may be able to recoup some of those added expenses if your new space is conducive to getting a tenant. For example, if you buy a larger home with a finished basement or in-law suite, you may have no problem renting it out and using that money to cover your extra expenses.
There are plenty of good reasons to upsize your home, but before you do, be sure to look at the pros and cons. More space might make life more pleasant and comfortable, but it'll cost you in other ways. As is the case with any major decision, take plenty of time to work through this one before moving forward.
Chances are, interest rates won't stay put at multi-decade lows for much longer. That's why taking action today is crucial, whether you're wanting to refinance and cut your mortgage payment or you're ready to pull the trigger on a new home purchase.
Our expert recommends this company to find a low rate - and in fact he used them himself to refi (twice!). Click here to learn more and see your rate. While it doesn't influence our opinions of products, we do receive compensation from partners whose offers appear here. We're on your side, always. See our full advertiser disclosure here.
We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.
The Ascent is a Motley Fool service that rates and reviews essential products for your everyday money matters.
Copyright © 2018 - 2021 The Ascent. All rights reserved.