Questions to ask before you upgrade

There has been much talk lately of the good opportunities that exist for homeowners with cash or equity in their properties to upgrade to larger, more expensive homes.

However, says Dr Willie Marais, national president of the Institute of Estate Agents (IEASA), there are other factors to consider before making such a move. “For example, you should ask yourself whether you want to spend all the equity you have built up as the deposit on a new home, or if you’d rather use only some of it to alter your existing home.

“If it’s more space you need you can often create this by adding on rooms or another storey – and then you also won’t lose the advantage of the years you have already spent paying off your home loan. If you buy a new home you’ll be starting again at zero.”

Before embarking on an upgrade, you should also consider your overall financial situation, he says, “and only contemplate moving if your work situation has improved and you are making more money than when you bought your existing home.

“When you move to a bigger home it’s not only the bond repayment you need to think about. The rates and taxes are also likely to be higher, as are the municipal service charges, and there’s also bound to be more maintenance. You need to be sure you can afford all these extra costs.”

On the other hand, says Marais, there may be good reasons to opt for an upgrade – including the fact that you’ve “outgrown” your neighbourhood. “For instance, the area you chose for your first home may not be where you want to settle down with a family, or you may perhaps decide you’d really like to live closer to work.”

And if that is the case, he says, you will need to think about whether you are comfortable making your move in the current market.

“When the market is in a boom phase, it will be much easier to sell your existing home and get top price for it – but your new home is also likely to be more expensive. If the market is slow, as it is now, finding a buyer for your existing home takes longer and you will no doubt have to negotiate price, but you should also be able to get more home for your money when you buy the upgrade.”

Aticle by: www.ieasa.org.za