With so many of us spending extra time at home during the COVID-19 pandemic, it is a great opportunity to reevaluate our spaces and our needs. For some of us, all of this time at home has made us realize that our houses are cramped or that we wish we had an extra room to turn into a home office. Or perhaps you have a baby on the way and are looking for more space to raise your family!
Regardless of the reason you are looking to move on up from your current digs, here is some information to help you better understand the considerations around making the move to something bigger!
Benefits of Moving on UP!
Whenever you scale up, it is important to remember that you will see an increase in monthly expenses from utilities to your mortgage payments to maintenance. However, these added costs come with some great benefits.
The biggest and most obvious benefit is more space, which provides a multitude of opportunities, including:
- Ability to expand your family and allow them to grow
- Provide a basement suite for elderly parents
- More space to host friends or guests (once it is safe to do so, of course!)
- Potential for a second bathroom or at-home office for ease of life
Scaling UP and Your Mortgage
One of the most important factors to consider when looking at any move is your current mortgage term. If you have to make changes during the existing mortgage cycle keep in mind that you may end up with penalty charges and will require requalification, including passing the stress test, to qualify for your new mortgage. In some cases, your mortgage may be portable which will make the transition smoother but you would need to check your mortgage agreement.
If you are unable to port your mortgage, you would need to re-qualify for a new mortgage at the current rates offered by lenders and would be subject to government changes, including the “stress test” rules. This test determines whether a homebuyer can afford their principal and interest payments, should interest rates increase. It is based on the 5-year benchmark rate from Bank of Canada or the customer’s mortgage interest rate plus 2% - whichever is higher.
Costs of UPsizing
When buying any home, it is always important to be realistic about the size of home you need. While you might LOVE that mansion with 4 bedrooms and 4 bathrooms, will you use all the space? As larger homes have increased expenses, it is important to ensure you will use all the space you are buying. Otherwise, you are just spending extra money!
If you have planned your budget and found that perfect home to fit the current needs of your family, you will want to think about the costs associated with moving. These can include Property Transfer Taxes and realtor fees on the sale of the home you are leaving behind. These fees are typically between 2.5 and 5% of the home’s selling price.
Beyond the costs associated with the sale of your current home and purchasing a larger residence, the costs of home ownership rise in proportion to the home you live in. If you are moving up from a condo or apartment to a single-family home, you will save on strata fees but will become responsible for all of the maintenance of your home. It is a good rule of thumb to save one percent of your new home’s purchase price, per year, for maintenance. For instance, if you purchase a $600,000 new home then you would want to ensure $6,000 a year in savings.
Contact a Dominion Lending Centres Mortgage Professional!
Making the move to a larger home is both an exciting and daunting process - but it is entirely doable with the right preparation! No matter what stage you are at with your home, a mortgage broker can help you move on up the property ladder and ensure future financial success so you can continue living the life of your dreams!