Does moving up makes dollars and sense?
Julie Garton-Good, GRI, DREI

You dream of a quiet place in your home to escape from the hustle and bustle of family life. The kids are fighting over bedroom space. Even the dog wants more room! So one Saturday you load everyone into the car and head out in search of a larger home. Emotionally, it makes sense.

But financially, are you prepared to part with some of your hard-earned equity (not to mention a bit more of your paycheck) in order to purchase a larger home? It's going to cost you money to move up.

Equity is the difference between what you owe on your home (all its mortgages, liens, etc.) and what you could obtain on the open market less your cost of sale (something that's overlooked by many over zealous move-up buyers. Looking -- carefully -- before you leap can make the difference between a financially prudent new purchase and a haunting economic disaster. Let's evaluate the costs.

  1. Some increased costs of purchase are obvious: You'll be paying a larger mortgage payment monthly to own a larger home (depending on your down payment), your taxes will increase and your homeowner's insurance will cost more. And if your down payment isn't at least 20 percent of the purchase price, you may even have to buy private mortgage insurance.
  2. There are additional costs that aren't so obvious. What about upkeep and maintenance? Utilities? Even the extended period of time it takes to clean the home on the weekend, taking time away from your family and other "fun" things, should be factored in.
  3. One expense many people overlook when buying bigger is the cost to sell their existing home, the cost of real estate commission and moving costs. (Though the cost may seem daunting, remember that using a real estate professional to sell your home often saves you money in the long run.) You'll also need to factor costs associated with title insurance, transfer taxes, deed preparation and property taxes, which you pay in advance.

So should you move up? The answer depends on what you're trying to achieve. If you're purchasing a home that will appreciate faster than your current one, gives you more space, is in a better neighborhood, and will make you happy, it may make sense to move. And, frankly, happiness often becomes the overriding factor to the move-up buyer. Yes, they may want different features than they have in their current home, but they also know that housing is housing -- being happy where you live is paramount.

Home buyers purchase with their "gut" and justify the purchase with their wallet. Long after you've crunched the numbers and consulted with an expert to evaluate a new neighborhood, you're still likely to follow your gut instincts and purchase the home that tugs hardest on your heart strings.