5 questions to ask before upsizing your home

Originally published on realestate.com.au 17 February 2017

If you’re thinking about upsizing your property, there are a few questions to ask to ensure you’re in the right mindset.

Whatever your reason for upsizing – be it marriage, having children, starting a business at home, or having a family member move in – the decision to upsize is significant.

Louise Tovey, Bankwest’s General Manager of Stores and Lending, sat down with us to address five key questions you should ask when making the decision to upsize.

REA Group logo Originally published on realestate.com.au 17 February 2017

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.” 

"It’s wise to think about your long-term goals for a property."

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 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.

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

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,” Tovey says.

“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.”

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Things you should know

The information contained in this article is of a general nature and is not intended to be nor should it be considered as professional advice. You should not act on the basis of anything contained in this article without first obtaining specific professional advice. To the extent permitted by law, Bankwest, a division of Commonwealth Bank of Australia ABN 48 123 123 124 AFSL / Australian credit licence 234945, its related bodies corporate, employees and contractors accepts no liability or responsibility to any persons for any loss which may be incurred or suffered as a result of acting on or refraining from acting as a result of anything contained in this article.

Originally published as 5 questions to ask before upsizing your home on realestate.com.au.