The Economics of Upgrading: How Move-Up Buyers Can Maximize Their Investment

Is it time to find a larger home to accommodate your growing family? Do you want to change neighbourhoods that have better schools, closer amenities, and superb scenery? Do you want to capitalize on your existing home equity? Maybe it is time for you and your household to move up to a new home that is a better fit.

Indeed, there are many reasons why families may choose to move up. For many homeowners interested in finding a more permanent residence suitable for their lifestyle, moving up is typically used to climb the housing ladder. This is a reliable tactic since they already possess, in theory, the equity from their current accommodations to qualify for a mortgage, provide a sizable down payment, or purchase a new home outright.

Remember, real estate is and always will be a sound investment, and move-up buyers have the opportunity to finance their retirement or pay for their children’s post-secondary education.

So, how can move-up buyers maximize their investment in this process? Here are a few strategies to think about:

Make Sure the Time is Right

Is timing the Canadian real estate market easy? Far from it. That said, it is vital to know what is transpiring throughout the housing sector so you can obtain the best price for your existing home and determine your target level to purchase your next place.

Ultimately, you do not want to rush to move because you desire a bigger home or a better location. Remember, you will eventually purchase a new home, but it is imperative to take your time, do your research, and work hard with your real estate agent.

Until then, looking inward and considering how to get the best price for your home would be vital. This could involve renovating your home, making the necessary repairs, or replacing kitchen appliances, as these measures bolster your property’s value.

Patience, planning, and flexibility are essential components to move-up buying initiative.

Sell Your Home First?

Should you sell your current property before buying a new one? While it might initially seem unclear, sellers can always insert terms and conditions in a contract, such as managing move-in and move-out dates. So, if you do not want to search for temporary housing options, this is a way to stay in your home until you are prepared to relocate.

This strategy will diminish the risks of carrying two mortgages and proffer you confidence and peace of mind by possessing the funds to execute your new purchase. Additionally, selling your existing townhome or condominium suite before acquiring a new one can confirm the important information you need in your next transaction: How much money you can spend.

A Smooth Mortgage Transition

A crucial part of the selling process is to foster a smooth transition from one mortgage and property to another. One tactic you can employ is mortgage portability. This ensures that move-up buyers can transfer their existing mortgage with its current interest rate and terms to the new home. Moreover, porting a mortgage helps simplify the financing process by not having to endure a new mortgage application process that leads to more fees and charges that eat into your long-term savings.

Remember, obtaining pre-approval from your existing lender or a separate mortgage broker is always a good idea so you know exactly how much you can afford.

The Right Investment

Invest in a more valuable property, which can provide you with greater financial return in the long run. You could also choose a more considerable property to rent out a portion, such as a basement apartment, to generate additional income and bolster the financial benefit of this new purchase.

Of course, this could be easier said than done and requires the diligence and expertise of your real estate agent. Adopting a slower approach in the selling or buying journey can improve the odds of making the right decision for you, your family, and your wallet.

Never Overextend Yourself

Let’s face it: It can be tempting to overextend yourself. Whether you have the equity or receive favourable mortgage terms, you want to refrain from going over your budget.

Put simply, never overextend yourself.

Understanding your financial situation and what you can and cannot afford is fundamental. As you move up, you do not want to suffer mountains of new debt since this will potentially reverse your gains and lower your position on the property ladder. Once again, this can be avoided by partnering with seasoned real estate agents and adjusting your real estate objectives to be more realistic.

Moving Up

The Canadian real estate market has stabilized since the public health crisis. Now that mortgage rates have likely peaked and home price growth has calmed, there is a bit more certainty for buyers and sellers. While prices are unlikely to return to pre-pandemic levels, the frenzy seen in recent years has subsided. With interest rates expected to ease in the coming years, buyers and sellers can witness fewer pressures, affording all parties to take their time.