When you were young and just starting out on your financial journey, you bought a house. Maybe you bought it as a single person, or perhaps you were newly married. Whatever the case may be, you bought an affordable home in a quality neighborhood and diligently made your monthly mortgage payment to the bank. Then life happened. And now you’re left wondering if it’s time to upgrade that starter home into something a little bigger, nicer, or more practical. Is it time?
Starter homes are great, but they eventually lose their luster. They’re also easy to outgrow when your family is expanding. If you’re wondering when to make the move, we’ve created a checklist that should bring a little clarity to the matter.
The first (and most practical) sign that you’re ready to move up in house is a change in lifestyle factors or circumstances. Here are two common illustrations:
While you shouldn’t go out and instantly turn every pay raise into a purchase, there’s something to be said for upgrading your starter home when you have significantly more room in your budget. If, for example, your household income has increased from $60,000 when you bought the home to $150,000 today, moving up in house is totally reasonable and justified.
There’s something to be said for selling while the getting is good. If you happened to buy in a really good neighborhood that’s appreciated significantly since your purchase, it may be smart to sell the home and capitalize on your good fortune. This equity can then be put into another home purchase.
If you’re looking down the timeline and seeing a bunch of upgrades and repairs approaching – such as a new roof, water heater, HVAC unit, appliances, etc. – it may be smart to sell. While a savvy buyer will see the age of the home, there’s something to be said for not having to handle all of these projects on your own.
Do you remember when you first bought your house? When you came home from work and pulled into the driveway, you thought to yourself, “I can’t believe this is mine!” You were quick to invite over friends and family to show off your new digs. You were happy and proud – in a good way!
If you’re no longer proud of your property, this may be a sign that you should sell and move on. While you can’t assume that you’ll find contentment and self-fulfillment in any home, there likely is a property out there will make you experience feelings of joyful home ownership all over again.
Some people decide to sell their house and then have trouble finding something else. Either they’re too picky, or they don’t have a clear idea of what they want in a house. If you’re on the opposite end of the spectrum – where you know exactly what you want – then you’re certainly ready. Now all you have to do is sell your house and find something that meets your criteria.
Very few people live in their starter home forever. For most people, income increases over time, families grow, and needs change. Thus, it makes sense to move into something slightly bigger and somewhat nicer. However, it is possible to take things too far. You have to make sure you put safeguards in place to avoid becoming house poor.
The term “house poor” is used to describe a situation in which a person spends such a large percentage of their income on home ownership – which includes mortgage payments, taxes, insurance, utilities, maintenance, etc. – that they don’t have enough money left over to comfortably meet other wants, needs, and financial obligations.
“The rule of thumb is that your entire mortgage payment should be no more than between 28 and 33 percent of your income,” personal finance blogger Amber Gilstrap writes. “In addition, you want to keep your total debt to income ratio (your monthly debt payments, including the mortgage, divided by your income) below 40 percent.”
As you move out of your starter home and upgrade your house, keep these rules of thumb in mind. It’s also important to trust your gut. If something feels off, it probably is. Take your time and don’t let anyone – including your spouse – pressure you into buying more house than you can afford.
When it comes time to sell your starter home, we’d love to help. At Green Residential, we’ve been involved in the Houston real estate market for more than 30 years. Not only do we bring experience to the table, but we’re also one of the few Houston realty companies that use a flat fee rate, as opposed to a traditional commission. This could potentially save you thousands of dollars in hard-earned equity. To learn more, please contact us today!
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