Trading up is one of the best reasons to move house. This should be the fun one, the exciting one, the time in your life for the big change that should be about enhancing and improving your day-to-day family life. It could be the next step on the proverbial property ladder or might be the decision to move into your “forever home”.
There are two primary motivations for trading up. First, it can be about upgrading your living environment.
That might mean moving to a nicer area, increasing your living space, getting a bigger block for the kids to run around in, a new home or a chance to live in a period property.
Second is the investment component. If you live in a $500,000 home and its value increases 10 per cent over a period of time, that is $50,000, of course.
But stepping up a level means those profits percentages become even larger. If your new home is worth $750,000, then with 10 per cent growth you have now earned an $25,000 on top of the $50,000.
Both these reasons can make excellent long-term financial sense as well as being emotionally fulfilling.
But in today’s market there are a few points to be aware of before you decide to trade up.
First of all, don’t forget the 20 per cent deposit rule. Ideally you should have this — or more — to move up the ladder. You may have 20 per cent equity in your current home but unless you have cash to add to it this, it will not be enough.
You could still make the move but I would use this as a financial indicator that you may be stretching yourself because it will mean you also have to pay expensive lender’s mortgage insurance.
Second, don’t forget to allow for stamp duty, the. Stamp duty is the absolute horror housing tax. There are no incentives or exemptions for you now you are a seasoned homeowner and not a first timer anymore!
Third, factor in real estate and marketing costs. Again, these can vary but certainly are more than likely to be in the tens of thousands.