Upsizing is when you sell your current home and relocate to a bigger one. People usually upsize when their lifestyle, family needs, or financial circumstances evolve, requiring more space or amenities. According to the Westpac Home Ownership Report (March 2024), there’s been a 4% rise in Australians planning to upsize their homes. If you’re ready to take the next step, here’s how to start.
When Should You Consider Upsizing?
Here are some clear signs it might be time to upsize.
- Growing Family Needs: Are you expecting a baby, having more children, or welcoming relatives to live with you? A bigger space might be essential.
- Improved Financial Stability: A new job or a salary increase can make affording a larger home more achievable.
- Feeling Cramped: If your current home feels cluttered or lacks the storage and space you need, upsizing could be the solution.
- Life Transitions: Milestones like children starting school or aging parents moving in often demand additional room for comfort and convenience.
Should I Relocate Or Renovate?
Renovating can be a cost-effective option, allowing you to enhance your current living space without incurring the high costs associated with moving, such as stamp duty and legal fees. Well-planned renovations can increase your home’s value, but it’s essential to avoid overcapitalising. If you love your neighbourhood and local amenities, staying put and improving your home might be the best choice.
Relocating could provide access to a larger or more suitable property that fits your evolving needs, especially if your current home no longer meets your lifestyle requirements. Moving can also open up new opportunities in different neighbourhoods or communities. However, it comes with higher upfront costs and the stress of transitioning to a new environment.
To help you decide if relocating or renovating is a better option, consider the following:
- Budget: Can you afford the total cost of relocating (stamp duty, moving costs) or renovating?
- Location: Are you happy at the current location or do you need to relocate to accommodate your future needs?
- Future plans: Is your current home your forever home? Then a renovation could be the better option.
- Property potential: Does your current home have the space or structure to accommodate renovations? If not, relocation might be a better option.
How To Use Equity To Upsize
Equity in your current home can be a powerful tool when upsizing. Here are two common ways to leverage it:
Sell Your Current Home
Use the proceeds, including the equity, as a deposit on your new home.
For example, if your home is valued at $750,000 and you have a mortgage of $550,000, you have $200,000 in equity. If you sell and buy a new property priced at $1 million, you can apply this equity, along with any savings you may have, towards the new purchase.
Keep Your Current Home
Retain it as an investment property and use its equity as security for your next loan.
In this scenario, lenders typically allow you to borrow up to 80% of your home’s value minus what you owe on your mortgage. For instance, if your home is valued at $750,000 and you owe $400,000, you could access around $200,000 in usable equity to help secure a loan for a new property. This approach allows you to build wealth through property investment while also upsizing to a larger family home.
How To Get Started With Upsizing Property
- Talk to a mortgage broker: Experienced brokers can handle all the hard work for you, from comparing lenders to securing the right loan for your needs.
- Evaluate your finances: Understand your borrowing capacity and how much equity you have for your next home.
- Prepare your current home: Renovations can boost the value of your current home. A property that meets buyers’ needs will attract higher offers and speed up the sale.
- Decide whether to buy or sell first: Many experts recommend selling your current home first to free up funds for your next purchase. However, bridging finance can be a great option if you prefer to secure your dream home before selling.
How We Can Help You Upsize
With the experts on your side, we can help you upsize to a bigger property.
- Bridging Finance: Secure your next home before selling your current one.
- Leveraging Equity: Use the value of your current home as a deposit or security for a new loan.
- Debt Consolidation: Combine multiple loans for a streamlined financial situation.
- Pre-Approval Assistance: Get pre-approved quickly to boost your buying power.
What are the costs associated with upsizing?
The biggest cost associated with upsizing is stamp duty, which varies according to states and territories. If you were to buy a $1 million property in Queensland, you would have to pay over $30,000 in stamp duty.
If you were to buy a new home using a mortgage, Lenders Mortgage Insurance (LMI) fees if you’re borrowing more than 80% of the property value, which could be between $32,000 and $37,000.
Other costs associated with upsizing include:
- Real estate agent fees if you’re selling the property
- Transfer title fees
- Inspection fees
- Home and contents insurance for new property
Key Consideration and Tips for a Successful Upsizing
How Much Can I Borrow?
Knowing your possible mortgage costs in advance helps you be more clear on what kind of property you want. Talk to your lender and figure out how much you can borrow for a home upgrade. This will also help you figure out if you need to refinance your loan or if the current home loan works just right. Get a rough estimation of your borrowing power using our mortgage calculator.
Can I Cover The Costs Of Upsizing?
What are the costs associated with upsizing? Answer: perhaps much more than you are taking into account now. These costs potentially involve a large stamp duty bill and Lenders Mortgage Insurance if you’re considering borrowing more than 80% of the property value. Costs of moving your things into your new home are also involved.
Am I Able To Afford The Greater Ongoing Expenses?
Keep in consideration that upsizing always comes with a surge in expenses, compared with your previous home. Moving into a bigger place means higher utility bills, higher repairs and maintenance costs, and the need for more homeowners’ insurance to top it all. Before talking to a professional about upsizing, calculate these expenses and see if you are financially capable of making payments.
What Are My Long-term Plans For My New Home?
Moving to a larger house is a big commitment. This decision should be based strictly on where you want yourself and your family to be in the longer term. For example, if you are planning this to be your last stop before retirement, make sure all your ‘must haves’ are ticked off. Selling a bigger house may be harder since not everyone is looking to buy a larger place. Keeping this in mind, decide on your long-term plans with your newer place before bidding on it.