So many articles are written about downsizing your home, but what about upsizing your home?
Whether your family is growing with the birth of a new child, the combination of households from a blended family and/or a multi-generational family, or maybe you’re tired of living in a shoe-box sized apartment or you’re finally ready for your forever home, sometimes you just need more space than your current house can offer.
What is upsizing?
When people talk about upsizing, they generally mean buying a more expensive home with more space. Most people think of upsizing usually just in terms of more square footage, but it can mean a lot of other great things too!
When I talk about upsizing with my clients, I always ask them to go beyond just the square footage and think about what upsizing their quality of life would look like?
It could mean a better layout, more rooms or nicer finishes (or that wine cellar you’ve always dreamed of). It might mean a better neighbourhood or a better location for the things that are important to you (e.g. moving closer to family, work, schools and other amenities). Maybe you want a bigger yard or pool, or to be close to parks and recreation trails for more outdoor living. Maybe you want to move closer to the city so you can walk to restaurants, bars and sporting events. Whatever it is, upsizing always goes beyond just additional square footage.
Ok great, now what?
Many of you have been through the home-buying process before, so you know enough about what you want and don’t want in your next home. But when you’re thinking about upsizing, you may have to think a little differently than when you purchased your first home.
What should you consider when you’re upsizing?
Why do you want to upsize?
First off, it is important to be clear on why you want to upsize. Is it for more square footage? More bedrooms? A finished basement? A bigger kitchen? A bigger yard? A better location?
What are the issues with your current home that are causing you to look for another? What do you like about your current home that you want in your next home? If you’re moving in with someone new, what do they want (or expect) in a new place?
We wrote an article on helping you figure out your needs vs wants and have a handy free cheat sheet to go with it. Take a minute to think about this and talk this through with anyone else who would be living in the new home.
How long do you want to stay in the home?
Is this just a stepping stone house until you can move up again (2-5 years), or this the home you can see your family living in for 8, 10, 20+ years from now?
If it’s a long-term buy, it’ll be important to think about longevity and the ability to adapt to your family’s changing needs. For example, you may have young children now and want a master suite on the same level as them, but it’s very likely that if you’re still there when they are teenagers that you might want a main floor or separate level master. Or maybe you look for a home with a finished basement that already has a full bathroom and kitchenette so it can be converted to an in-law suite for either your aging parents or your college-aged kids in the future.
Are you financially prepared for it?
I suggest starting with a free home evaluation (if you’re in the Ottawa area, I’d be happy to help with this). This will give you a realistic picture of what your home will sell for on the market today. To calculate how much equity you could use for the downpayment on your next home subtract your current mortgage, realtor fees (5-6%), and legal fees, disbursements, cleaning and moving costs(2%) from what your home is expected to sell for.
Have you been pre-approved? If not, contact your lender or mortgage broker to get this started. This is the first step to preparing financially for upsizing.
Next, have you set a realistic budget? While your pre-approval gives you a range of mortgage your lender would be willing to give you, is that realistic for what you can afford and what you want in your next home?
Don’t become house-poor!
Ensure you’ve figured out what you can comfortably afford as a monthly payment while still maintaining your current lifestyle. Remember to factor in to your budget additional long-term costs that arise when you’re upsizing (e.g. higher property taxes, insurance, utilities, and yard maintenance services on a larger home etc). You will need to budget for additional furnishings if you are greatly increasing square footage as well. Finally, don’t forget to increase the amount in your Emergency Fund or savings to cover the costs of any unexpected repairs and regular maintenance (larger roof, more plumbing/electrical, etc)
Some other things to consider
Get the most out of your house
Make the necessary improvements to your home to make it attractive to buyers, but don’t over-improve as you won’t see the returns. Make a good first impression with curb appeal and a clean, decluttered home. Check out our articles on repairs to make before listing and how to improve your home’s curb appeal.
The age-old dilemma of selling your existing home first or buying your next home first and then selling.
This is not cut and dry and will depend entirely on your local market and your situation. Some things that can change timing (and remember, there’s exceptions to every point below):
- In a slow market, it is generally better to sell your home first. Not only will this take the pressure off of carrying 2 homes, but if your purchase is dependent on selling your home, you could be at a big disadvantage if you get stuck in a bidding war if you don’t sell first.
- In a hot market, it may be better to start with buying. This is especially true in places where multiple offer scenarios are common. You could lose out on a lot of homes before you find one that fits your criteria and you’re the winning bid. In a hot market, it’s more likely that you are able to sell your home quickly too, especially when it is at a lower price point. (For example, here in Ottawa, when people decide to upsize to the $700k+ range, they usually own a home in the $450-650k range. This lower range is very hot right now with many homes selling very quickly (sometimes less than a week), so I always get clients to start with getting their next home under contract first.)
- A vacant home is more difficult to sell as people have a hard time connecting emotionally with a bare home (as well as wondering if their furniture will fit and where they would put it). Therefore, it’s usually best to sell your home before you move out.
- In addition, you need to consider if you are able to carry two mortgages for a period of time or not.
As always, it is best to talk to a local realtor so they can give you advice on timing for your market and personal situation.
In an ideal world, you would be closing on your next home at least a week or two before your house is closing. This gives you time in case of delays with closing (sometimes legal and financial professionals take longer than expected), as well as a good buffer of time to tackle things like cleaning and painting at least some of the new house before moving in.
If you’re worried about not being able to find a home before your house closes, there are a couple of options. First off, you can request a long closing from the buyer (e.g. 3-4 months, instead of the usual 30-60 days). Alternatively, you can have a lease-back agreement. This means that your house can still close (allowing you to get the money from the sale), but you rent the home back from the new buyer for a set period of time.
Main Takeaway (TLDR)
With proper planning, upsizing your home can be an exciting time! Just make sure you’re prepared by taking these steps:
- Determine why you want to upsize, what your needs are, and how long you want to stay in the home.
- Get a free home evaluation.
- Talk to your lender or mortgage broker about your lending options (pre-approval, bridge mortgage, carrying two mortgages, etc).
- Set a budget you’re comfortable with, factoring in all the additional costs of a larger home.
- Get the most out of selling your house.
- Speak to a local realtor about timing the selling and buying of your homes and your closing dates.