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Lately, there’s been a lot of talk about downsizing – moving into a smaller home as you grow older. However, if you’re only just starting to see your family grow, the opposite – upsizing – is much more relevant. As your assets, family and needs increase, you might just find you’ve outgrown your home and need more space for your day-to-day living. Upsizing isn’t as simple as it sounds though – from increasing your mortgage to maintaining a larger property, there are many factors to be taken into consideration before you upgrade.
Whether you have a growing family or you’re starting a new home-based business, it’s crucial that you ask the right questions. Get in touch with us today to get help.
So what are the pros and cons of property upsizing in Australia?
When there’s another one on the way, you should be thinking about whether or not you have enough space.
The argument for upsizing
Moving into a new, larger home has some undeniable benefits. Having more space allows you to give your children the space to grow both physically and socially (e.g. having friends over). It can also impact our own social lives as adults, as we might have more capability to host guests and, if so inclined, spare rooms could be rented out using Airbnb.
A larger home can also give you working space for personal projects or developing your own business before you have the startup capital to acquire a commercial space.
Upsizing can also have tangible financial benefits in the future. In a positive property market, your home’s value may appreciate over time, leading to considerable revenue when you go to sell. The windfall from this sale can help to free you from your mortgage later in life and, if the right conditions are met, allow you to contribute up to $300,000 to your superannuation.
A new home may mean plenty of space for a growing family and more room to move, but can you afford the price of moving and filling the large space?
What to be wary of
That said, there are plenty of costs that need to be taken seriously. Of course, it’s possible you’ll be spending more on your mortgage with a higher value home, but remember to think about other costs such as:
Property maintenance: Are you prepared to look after a larger plot of land? From the house itself to the grounds and garden, you’ll be responsible for caring for a greater area. This means not only more time out of your life, but a higher spend on maintenance products.
Higher bills: Heating and lighting a larger home is generally more expensive. You’ll likely also need to spend money upfront to connect services to your new home.
Buying and moving costs: Besides the hire fee for the moving van, you’ll need to take account of the time taken off work to arrange your move, any new furniture needed to fill the home, stamp duty, and legal, agent, and property inspection fees.
Bridging loans: If you aren’t able to sell your home before finding your next property, you may need bridging finance. While a great solution to the dilemma, bridging loans mean you’ll be required to service two loans at the same time. If your home sells for less than expected, this could cost you a lot.
Weighing up the costs
So, is upsizing the best idea? Could renovation be a better option?
If upsizing is ultimately in line with your goals – be those financial, familial or business-related, it could be a risk worth taking. It’s important to develop a comprehensive financial plan that takes into account your objectives.
Do not feel like you have to face these decisions alone. Get it touch with us today to get help.
What you need to know
This information is provided by Invest Blue Pty Ltd (ABN 91 100 874 744). The information contained in this article is of general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regards to those matters and seek personal financial, tax and/or legal advice prior to acting on this information. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relations to products and services provided to you.
