Published on June 24th, 2016 | by Martin Clancy
Moving House: Trade up or Extend?
Thinking of moving house but love your home, the location and your neighbours?
It’s a dilemma many homeowners face. If you feel you have outgrown the space the option is to either move house by way of trading up or extending your current home.
Above all, before you make a decision – make sure you know what you’re about to get yourself into.
It’s generally cheaper to stay in your current home and renovate it as opposed to selling your home and moving house to a bigger one.
Under the current deposit requirements laid down by the Central Bank, if you plan on trading up you will need to have at least 20% of the purchase price. Remember, this is in contrast to the rules for first-time buyers which we discussed in “Buying your first home”.
Renovating may by the cheaper option in some cases, however, some people are just not cut out for living with the disruption, dust, chaos and the overall disruption to daily life.
2) Mortgage Considerations
If you do opt to move home, then you will need to think through the various scenarios that you may face. Buying generally means selling too!
Your current property is already sold
So you’ve already sold your home? Then applying for a new mortgage is a relatively straightforward process when purchasing a PPR (principal private residence). Your lender will generally take a look at your current income, employment, repayment history and capacity etc.
You will need to check with your preferred lender for the exact details on the package they are offering you; however – the loan to value is typically 80% with a maximum term of 30 to 35 years depending on your situation.
You plan to sell and then trade up
You will want to sell before you buy. “Simultaneous closing” is what everyone wants, but in reality it is difficult to achieve with so many moving parts in the process and potential points of delay.
If you sell first, then you do need to consider the rental market as you may need to avail of a rental property for a period of time. Check out the latest Daft Rental Report to see what you could expect to pay; the report showcases average rents by location and property type.
Property values are increasing. Inflation in asking prices is at nearly 6% as detailed in the Q1 2016 Daft House Price Report.
Over the last few years homeowners in parts of Ireland are noticing that their home value has increased by anywhere from 10 – 20% and in some cases much more. If you do some research online you may find that a bank will lend you money against the equity in your home.
The next step will be to define the extension you want to conduct.
Do you want an extra bedroom or bath? A bigger kitchen? Make a list of everything you want and then prioritise how much it will cost to extend.
Another thing to consider is whether these changes can be made inside your current home or if you will need to extend beyond the original walls. Depending on the expansion type; you may be able to stay in the house during the construction period.
Make sure to prepare yourself for moving home or extending.
Purchasing a new home and selling at the same time will mean a lot of extra stress. The stress might come in the form of carrying two mortgages or getting a bridging loan etc.
Remember how it felt when purchasing your first home?
Other expenses to consider:
- Stamp Duty
- Property Tax
- Professional Fees (Solicitors etc.)
- Rental/Storage costs etc.
That said; it may be preferable to take the extra financial burden rather than having the stress of builders coming in and out of your current home. Some people may prefer that, to the dust and disruption they would face if they decided they wanted to extend rather than moving house.