One of the effects of the pandemic in the last two years is we’ve all spent lots of time at home. This time has hopefully meant you spent more quality time with the family, in the garden and getting to projects you’ve put off for a while. But for most of us, we’ve noticed all the issues that our homes cause from lack of space, it’s age and it being plain ol’ ugly.
If you’re ready to do something about it, here are some considerations before you decide to renovate your existing home with a mortgage top up or upgrade to a home that better meets your needs but has a larger mortgage.
Watch instead: Renovate or Upgrade
Consider your age and stage
If you’re on the younger side of your years you might decide you’re okay getting a significantly larger mortgage, because you have lots of time before you retire.
However, if you get a larger mortgage closer to retirement, you’re more likely to have a mortgage in retirement or will have to delay retirement because you have to pay your mortgage.
Consider whether it’s time to focus on wealth building
No matter when you plan to retire, you need time on your side to make the most of your wealth building efforts. You can only increase your net worth by decreasing your debt or increasing your assets, but, outside of a huge cash windfall, both need time.
Building wealth with a freehold house accelerates your investments because it frees your income so that more of it can go into growing wealth. It might be time to stop adding more personal mortgage debt and start paying it off faster.
Consider a ‘lateral upgrade’
If you time the market right, you might be able to buy your next home but swap it out for one that has a similar mortgage you have currently. This means your next home won’t stop your wealth building efforts and will meet the needs of your family at the same time.
Consider the needs of your family
Depending on your family, your current home just may not work. It’s hard to think about the future when your present is squashed and chaotic. Consider whether it’s time to temporarily prioritize the needs of your family over wealth building.
A note about upgrading
The size of your upgrade makes a difference. A large leap upward can pinch your spending plan to the point where it you don’t have a surplus to invest.
Keep in mind this article is providing general information and not individual financial advice.
If you’d like a review of your situation and customized advice for building wealth to reach financial freedom and live a fulfilling life, please book a free 15-min chat.