Upsizing by extending an existing home or selling it to move to a larger one will likely involve refinancing your home loan and most people will be looking at a larger mortgage and higher monthly commitments. You can save yourself from the pitfalls of extra financial burden by avoiding these costly mistakes:
Making impulse decisions on the property
Since you currently have a home and may be looking to sell it off in future, it’s best to make a right and well-thought out decision before moving out.
As upsizing your property is usually done with the intention of living there for quite a while, you should think long term.
Will the characteristics of this house suit you and your family? For instance, you shouldn’t stay in an area just because your children are studying in the primary school there – as they will complete their education in a maximum of six years.
Disregarding long-term factors
You want to upsize because you recently got promoted or a huge pay rise? This can be a big matter as you’ll have to take on more debt for a bigger loan.
For most people, as soon as they are financially comfortable, they start looking at ways to upsize like getting a bigger house, a new car, or a big-budget renovation.
But these are ways you can get financially uncomfortable again, because you’re taking on more debt. This leaves you with few opportunities to save for your retirement.
Not checking your eligibility
Before you go house hunting for your new dream home, you should check your eligibility with the housing loan eligibility calculator.
Also check your credit report to see if you have other debts you aren’t aware of and check if there’s anything incorrectly recorded.
Forgetting about financing
Various banks will approve your loan at different rates after assessing your financials. The main thing they look at is your debt service ratio (DSR).
Some let you borrow more and some less depending on their determined DSR threshold. It’s best to get a pre-approved mortgage loan.
Lawyer fees, stamp duty, renovation, agent’s commission, downpayment, furniture… the list goes on. Before approaching banks to get a loan, consider whether you have enough cash/credit to cover all sorts of costs that will be incurred during the process.
Neglecting your current home
You’re surely very excited to move to your new and bigger home but what about your current one? You have to decide whether you want to sell or rent it out.
Regardless of the decision, keep it tidy and in good condition. Its condition matters because it affects the sale value
or rental income. Do not spend all your money on your new home and neglect the old one.
It’s easy to get carried away by the excitement of buying and moving to a bigger/better property. Decide carefully before you upsize to avoid making costly mistakes that create financial regrets.
This article is courtesy of Loanstreet.com.my, an independent loan comparison and application website that also offers personal financing tips. Visit the website to learn more about your current financing options.
Property 360 Online
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