Life is constantly changing from your career to your family as we climb up the ladder of life. With these life changes, your current home may no longer be working for you. When you find yourself cramped in your tiny apartment or have a little one on the way, it may be time to look at moving on up!

Affordability

There are many things to consider before moving to a larger home. For instance, whether or not you can afford to make the move and buy something bigger

• If you are planning to upsize during your current mortgage cycle, you will be breaking the mortgage. As result, you will have to go through the entire qualification process again for your new mortgage. There may be penalties depending on the term in your mortgage.
• Some mortgages may be portable from your existing to the new home. This would make the transition smoother. Be sure to check your mortgage agreement for more details.
• If you are unable to port your mortgage, you would need to re-qualify for a new mortgage. The new mortgage would be done at the current rates offered by lenders. Also, this would be subject to government changes – including recent “stress test” rules.
• If it has been a while since you bought your first home, you may be unfamiliar with the “stress test”. The government introduced the “stress test” rule on October 2016 for insured mortgages (down payments of less than 20%). On January 1, 2018, the policy was updated to apply on all mortgages regardless of down payment percentage. This test determines whether a homebuyer can afford their principal and interest payments when interest rates increase. It is based on the 5-year benchmark rate from Bank of Canada or the customer’s mortgage interest rate plus 2% – whichever is higher.

Taxes and Fees

The next thing to consider are taxes and fees. There may be large Property Transfer Taxes and you would also pay realtor fees on the sale of the home you are leaving behind. These fees are typically between 2-5% percent of the home’s selling price.

The Cost of Home Ownership

Beyond the costs associated with the sale of your current home and purchasing a larger residence, the costs of home ownership rise in proportion to the home you live in. If you are moving up from a condo or apartment to a single-family home, you will save on strata but will become responsible for all of the maintenance of your home. As a rule of thumb, it is best to save 1% of your new home’s purchase price, per year, for maintenance. For instance, if you purchase a $600,000 new home then you would want to ensure $6,000 a year in savings.

Making the move to a larger home is both exciting and daunting. However, it is entirely doable with the right preparation! No matter what stage you are at with your home, a mortgage professional can help. Not only can I offer expert advice, but guidance as you move on up the property ladder. I also have your best interests at heart and will work to ensure future financial success so you can continue living the life of your dreams!