How to decide when to trade up to a bigger home

When you move to your first home, it can feel like a massive upgrade. Over time, however, you might find yourself thinking about trading up to something larger. There are plenty of reasons why moving to a bigger home makes sense, but it isn’t right for everyone.

When is the right time to upsize?

There are a few common reasons to consider upsizing and moving to a larger home:

• You want more room for your family – Whether you’re planning to have children or welcome relatives into your home, you might want more space for your growing household.
• You want a home office – If you’ve been working from home and doing your job from a laptop on your kitchen table (or other makeshift area), it might be time to upgrade to a home with dedicated office space.
• You want more outdoor space – Whether you’d like to garden or have a yard for the kids or pets to play in or a patio for grilling and hosting, a bigger home could come with more outdoor space.
• You want to use your home as an investment – A larger home is usually more valuable as an asset, and it can potentially generate income if you have rooms to spare.

Is it better to invest in a larger property?

Real estate is a popular long-term investment for a reason: It has offered consistent returns. In general, larger homes are worth more than smaller ones — but buying bigger can be like putting all your eggs in one basket, with more tied up in that single asset. This can mean you’re more at risk if home prices fall.

Additionally, you might have trouble finding a buyer when you sell. This is especially true if you buy a very large home that isn’t affordable for the typical buyer in your market. If you’re concerned about liquidity, that means that a bigger home can be a detriment.

Should I move up to a bigger home?

If you’re thinking about moving up to a bigger home, consider:

Can you handle the additional maintenance, taxes and utilities?

Bigger homes cost more, plain and simple. They require more upkeep, which means either paying more to hire someone to take care of things, or spending more of your own time on maintenance and housework. If you enjoy taking care of your home (and have the time for it), this might not be an issue, but if not, and your budget can’t accommodate extra help, it can be a deal-breaker. 

A bigger home also means more space to keep warm or cool, as well as more lighting and other electronics to operate, so expect to spend more on utilities overall. You’ll pay more in property taxes, too, since its assessed value will likely be higher. 

Are you giving up a good location?

If you’re looking to have more space, it might mean moving to a different location, especially if you live in or near a city. Consider that the new location might not have the amenities you enjoy in your current neighborhood or town, or you might wind up in a different school district or with a longer commute to work.

What do mortgage rates look like now?

If you bought your current home when mortgage rates were low, trading up to a larger one today means getting a loan with a higher rate. That can significantly increase your costs.

“Trading up is tough right now because of the [rising rates] in this environment,” says Dennis Nolte, CFP, vice president at Seacoast Bank in Winter Park, Florida. “Unless you absolutely need the room, or are relocating to an area that has cheaper housing than your current abode and you’re going to be in the home four or five years or more, the amount of time it usually takes to burn off the cost of closing with a mortgage, it doesn’t make much sense to ‘go big or go home.’”

Will you have to sacrifice in other areas of your budget?

Because larger homes have higher ongoing costs, you’ll have to budget for those expenses. If finances are already tight, it might not be feasible to take on more, so weigh the benefits of having a bigger house with the drawbacks of cutting spending in other areas. For example, getting a larger yard or an extra bedroom might mean taking fewer vacations or spending less on a favorite hobby.