So, you have decided it’s time to upgrade your home. Perhaps your family is growing, and you need more space, or you want to move into that swanky neighborhood you’ve had your eye on for a while.
Whatever the reason, there are some things you will want to keep in mind as you prepare to make the change.
Bigger/More Expensive Home = More Expenses.
Other than a bigger mortgage payment, you’ll also want to consider that things like property taxes, utility bills and maintaining or repairing both the inside and outside of your home will also likely increase.
If you didn’t have them before, will you now have homeowner’s association dues? Will your current dues increase?
These are all things you will want to keep in mind when crunching the numbers to make sure an upgrade makes sense for you and that your income will be able to support the move.
Mortgage Interest Rates
Interest rates for a mortgage can change from week to week and from lender to lender so you will want to compare options. Currently, Colorado mortgage rates are running as low as 2.690%, to around 3.375% if you have excellent to good credit.
Obtaining the lowest interest rate should be a factor in your decision to buy a bigger home. If your credit score is on the weaker side, you can expect to pay a higher interest rate, which will increase your monthly payments. See our blog on 4 Ways to Overcome Bad Credit When Purchasing a Home for ways get your credit to a better place.
Current Home’s Equity
Before you determine how much financing you will need, you will want to factor in your current home’s equity.
You can offset a bigger mortgage payment using the equity you have built up in your current home. When you sell, you can apply the “profits” or equity beyond what you owe on the home to your down payment and lower your mortgage payments on your new purchase.
Keep in mind, if you meet the primary residence ownership test (if you’ve lived in your home 2 out of the last 5 years), as a couple you could exclude up to $500,000 of a capital gain on the sale of your current residence.
Consider the Condition of the Market
At any point in time, it is either a “buyer’s market” or a “seller’s market”. This just means the market is favoring buyers or sellers, not both. Currently we are in a “seller’s market”. This can be good for you as a seller, as you will be able to maximize the proceeds coming out of the sale of your home. On the buying side, it could make things challenging. This is something to discuss with your REALTOR® to ensure you take all the factors into consideration and create a strategy that will work best for you.