- How Much Money Is Needed To Invest In Rental Property?
- Should A Real Estate Investor Get An Agent’s License?
- 5 Big Factors That Affect The Costs Of Renovating Your Home
- SIBOR Hike – What You Can Do With Your Current Loan
- 6 Basic Don’ts Of Real Estate Negotiation Tactics
- Will New Condo Relaunches Trigger The Great Property Sale We Have All Been Waiting For?
- 10 Proximity Amenities That Add Value To Real Estate
- How To Get Personal Loans More Easily With Good Credit
5 Household Expenses That Will Increase After Trading Up
It’s one of those stages that almost every household will go through sooner or later.
Suddenly it dawned on the homeowner that the home is simply not big enough for the family. Especially when a new baby is on the way… and another dog has been adopted from the shelter.
Some people think that trading up homes make little sense because why take on a new debt obligation for a bigger loan when one is already so close to fully paying it off.
Yet for a lot of households, it makes perfect sense to upgrade.
Sometimes trading up is not the key reason for a move, but since a move is going to happen, homeowners feel that they might as well move into a bigger better home.
Here are some recurring expenses that the household will incur after trading up to a bigger house with better features.
This is the most obvious expense that you can expect to pay for. And it is usually the most significant one that have the largest impact on the household budget.
Although there are exceptions, there is very little likelihood that you will be paying a lower monthly mortgage. Let alone match the previous one.
Even in the event of trading down, one might also see an increase in monthly mortgage commitments.
Unless you have a huge amount of savings kept somewhere and more than willing to dump it all on the payment for the new house, get prepared for an increase.
The silver lining is that the payments will beef up your home equity which can come in handy some day.
2) Property tax
When you are trading up, the odds are that you are moving into a house with a higher value compared to the previous one.
Since annual property tax is calculated as percentage of the property value, it is inevitable that tax obligations in this area increase.
However, depending on where you reside, the methods whereby property value is calculated by the authorities can vary.
So do check with the local relevant authorities if you want to get more clarity on how property taxes are worked out.
The bigger the house, the higher the utility bills will become.
A bigger house will need more lighting, stronger heating, more housekeeping expenses, etc.
But there are certain cases where households actually experience a drop in utility bills even though they have moved to a larger house.
This is often due the families moving from an older house that was still using old-school energy fixtures to a more modern home that is built with energy-efficiency in mind.
This is a reason why the industry for solar panels, high-tech insulation, and modern heating systems, etc, are booming. And demand will probably continue to spike for years to come.
Unless you are perfectly fine with living in a home that looks empty from various angles, you will absolutely need more furniture and furnishing to fill up the extra space in a bigger house.
A surround sound home theater system might be too tempting to pass on when the bigger living room is calling for one. The more spacious kitchen makes that dream kitchen island a real possibility. And the high ceiling can seem so empty without a majestic chandelier hanging above. Even a number of walls can look so bland without any wallpaper on them.
It almost seems that we never stop spending on furniture, appliances, and electronics.
And the bigger the house, the more extra space we can use for these items.
The more expensive the house, the higher the premiums for homeowners insurance.
And since you will very likely be increasing the number of valuable items and personal property in the house as stated in previous points, you will probably need to insure more of your wares.
If you are a landlord, other types of insurance expenses might also increase.
For example, a bigger house can mean more tenants. This increases the risk of accidents happening in the property. Requiring better insurance coverage for protection.
Most people who are upgrading to a bigger house are on a higher income compared to when they bought the previous house. So an increase in household expenses after trading up is easily manageable from a financial perspective.
But if you are not doing much better financially than what you were before, don’t be afraid to cut corners to keep yourself afloat. Bursting the household budget on a bigger house is not a smart thing to do.
If you have plans for retirement or saving money for the kids’ education to avoid the money death pit known as student loans, then maybe trading up is not a pragmatic thing to do and requires some serious reconsideration.