Remember when you bought your first home? The excitement of getting the offer accepted and the contract confirmed? I’m sure you won’t forget the day you moved house and finally had a place to call your own. You probably felt you had moved into a mansion – yet in a surprisingly quick period of time the house soon fills with items and the kids start getting bigger and wanting their own space. Before you know it that driveway is full of bikes and vehicles and everyone wants their own bathroom and television. Suddenly your mansion doesn’t feel so big anymore!
We all outgrow our living space with the arrival of kids – and as you develop more income and more wealth it’s only natural to want to improve the space in which you live to something that’s better than what you have.
A property upgrade can often mean a revisit to the bank and the need to refinance. Before you start hunting for houses or refinancing options though it makes sense to decide what suits your new lifestyle and how you can upgrade your living conditions without breaking the bank. Here’s a few factors you might want to consider.
What can you afford to service? Remember getting that first mortgage? The lender was keen to know your disposable income level and things haven’t changed. With the benefit of promotion and inflation your income has hopefully increased allowing you the ability to service a higher level of debt.
How much can you put in yourself? Your previous lender was also focused on the equity you had to contribute in the form of a deposit. Even with the added expense of raising children, hopefully you have managed to build a nest egg that can be devoted to your new home. The greater the deposit the more you can generally afford to buy.
What loan options are available? If it’s been a few years since you last saw a lender, you might be pleasantly surprised to find the number of lenders and types of loans available have altered a great deal in the ensuing years. Greater flexibility in lending facilities is the order of the day with banks having to compete with other non-bank lenders in the mortgage market.
Buy or Renovate? Refinancing to complete home renovations or extend your existing property may provide an affordable alternative to moving house and offers a number of advantages. You are already familiar with the neighbourhood in which you live and home renovating can avoid some of the costs of relocating that would otherwise be incurred. You can avoid the hassle of shifting but be prepared for the inconvenience that home renovations can provide.
What about some supplementary income? If you are determined to move then there is the added possibility of finding a property that not only makes for a larger family home but can also contribute to providing an additional source of income. A place with a granny flat can provide additional rental income, either through permanent renting or through online sharing platforms such as AirBnB. Even an additional bedroom as part of the main house can provide income through rental to travellers or students. The added income can provide you with better serviceability in the eyes of the lender, further increasing the value of the property you can afford.
Think of the future. You may have underestimated how soon you would need a bigger house and it’s important you don’t put yourself into this situation again. When assessing options consider the needs of your family for the foreseeable future. Ideally you want a home that will last until the kids move out.
You also need to consider your own requirements. Do you see yourself wanting to take care of a bigger property in the long run? With an ever growing number of children choosing to live longer in the family home, you may have a large number of dependents under your roof for longer than you think. Make sure you consider your own long term needs as well as other occupants and don’t assume they will be moving into their own place anytime soon unless you decide to give them a hand.
There is a lot to think about before making a decision on your next big move. It’s important you weigh up all the options and possibilities. Talk to a financial planner or mortgage broker about the options you have and what you can afford – they will be able to suggest some alternatives you may not have even considered
The information provided is intended as a guide only and does not take into consideration your personal situation, needs and objectives and should not be considered as advice of any nature.