You may want to read the previous chapter on the importance of family and career on the home-buying process here.
An important factor to consider is the ‘greater purpose’ of your new home. Generally, a home buying decision falls under one of these five categories: trading up, downsizing, relocating, retirement, and property investment. Let’s take a closer look at each of these.
You have reached a stage where your current home is simply insufficient for your growing needs. You require more space, a better location, more luxury and/or more social or technological features. In order to make sure your resources keep pace with your desires, you’ll need to evaluate your current situation and crunch the numbers to see how much more you can actually afford.
Don’t rush into a purchase, however, unless you are really pressed. Careful market observation and consultation with your Realtor® may enable you to get a very good deal on your bigger-and-better home if you are patient enough. While waiting, you may be able to increase your credit score, decrease your indebtedness and even save up to ease up your mortgage burden.
Photo by Nicky Dugan
Another point to keep in mind is that the amount of house you can afford can be larger than the amount you actually need. Be reasonable. Don’t hesitate to buy your dream home, but think ahead – are you going to be able to afford it under all circumstances in the future? Will it be comfortable for you to take care of in a few years? Examine carefully your expected lifestyle requirements.
You own too much home for your current needs and think you could do with a little less. Or maybe your kids just moved out and you’re getting ready for retirement. Whatever the case may be, it’s time to get comfortable.
Photo by Bruce Turner
If your desire to downsize is due solely to a sudden reduction in income or the need to save some cash, consider whether it is better for you to sell your home or whether you can manage your finances in some other way. It would be a shame to let go of your most precious asset (assuming you’re still in love with it) when there might be another way. Be creative and audacious! Have you considered turning a part of your home into a B&B, for example? Some locations are more interesting than others for a B&B, of course. How about renting out the garage as a workshop, or turning it into a small studio apartment for a student from the nearby university?
If you do decide to downsize, carefully select items you won’t need in your new place and sell or donate them. This will give you more space in your new home, and may even earn you some cash. (Craigslist is a surprisingly lucrative way to cash in on furniture, home decor and collectibles.) Measure your pieces to see if they can fit neatly into the smaller place and be realistic about what to take – after all, your new home is a fresh start, and the perfect chance to practice ‘out with the old’.
If you don’t want to deal with too much maintenance in your new home, look at a town home or a condo. If you are really unsure about your decision, you may even start your journey by renting something smaller for a while – you will soon find out if (and how) a smaller space works for you, without the commitment of a permanent move.
When you are relocating for work, you may or may not end up changing the size of your home in the process. But there may be other changes involved; you may be moving from a rural area to the city, or vice versa. Even if the suggestions mentioned in trading up or downsizing do not apply to your own unique situation, the move is still an opportunity to improve upon your environment! Take note of everything that you loved (and hated) about your old home and let that dictate what you might want from your new home. Even houses in the same price or size range can be very different in many respects, and this is definitely the case when you are switching cities.
If you’re moving to retire into your ‘forever’ home, make sure the new place will be comfortable for you, both financially and physically. Seek a very accessible house, preferably a single-storey style with few stairs and level thresholds. If you are still looking at multi-level homes, make sure the ground floor has both living and sleeping areas (or can be retrofitted easily), so you are not forced to climb to the second floor all the time. Consider wheelchair accessibility – even though you may never need it, some of your friends might, and you do want to host parties that everyone can attend.
Photo by Cliffano
Investment (an Extra Home)
If you have extra money to invest in your future, you may consider buying a second property (or hanging onto the one you are moving up-and-out from). No matter what the current real estate market is up to, a well-located house is always a great thing to own.
When investing in a second home, the benefits are endless – depending on the location and other factors, you can use it as a summer residence, create a family compound, or establish a base camp for work, sports or recreation. If you lay out your schedules well, you may be able to rent the house out to seasonal tenants (such as students during the semesters) and enjoy it yourself during the school breaks. Such arrangements tend to work like a charm for families with kids of their own, especially if you rent to responsible individuals. If you don’t want or have to rent, you can still open the house up to your friends and family for use during their vacations.
If you don’t feel like purchasing an investment home on your own, why not share ownership (and expenses) with somebody else? Do you have a cousin who loves to travel in summer, while you prefer winter relaxation? Go fifty-fifty on the mortgage payments and enjoy the benefits of joint ownership. In the end, whichever one of you retires first could choose to cash out the other partner and acquire the entire property.
Whatever the final logistics, make sure you are investing in a home that will best suit your future lifestyle. Select a community in which you’d like to live further down the road. As you would with your primary home, take the time to carefully consider the features, amenities, carrying costs and location. If you are planning to make use of the house right now, try to imagine how often you will visit it and whether renting it out for income makes good sense.
A second home may come with a higher interest rate on your mortgage. Depending on your situation, you might be able to offset this by collateralizing your current home to the loan on the second one. Sit down with your mortgage professional or financial advisor to craft a strategy for managing your loans that will minimize your interest payments and maximize your returns.
Now that you know whether you are trading up, retiring, investing or downsizing, learn why you should bring a good Realtor® into play.
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