Is It Time to Move Up?

I have helped many clients over the years with a real estate technique that's simply called "Moving Up". Although fairly self explanatory it can be very enlightening to look at the benefits of this simple strategy to reduce your taxes, lower your interest rate, increase the size of your home, lower your maintenance, increase your closet space, reduce the age of your home, and in some cases, all of the above combined with lower monthly payments or fewer years left on the mortgage. As houses age certain elements gradually become functionally obsolete such as bathrooms, closet space and kitchens. Newer construction is on the cutting edge of improvements to our living space and life can be a little more pleasant when our closets actually hold all of our stuff with room to spare.

We may also have more time and money for our other interests because we spend less time painting and keeping up with expensive maintenance. So let's take a look at some of the elements that are identifiable as green flags to consider moving up. First, how long you have been in your current house is a key factor. A general rule of thumb is that you need at least three to four years residency to justify a look at moving up. Five to Seven years is the most common range where we find that the benefits are most definitely noticeable. Ten years and above will in most every case produce benefits which will make it hard to decide to stay in your current home. A second, very important factor, are current interest rates. If current interest rates on new mortgages are lower than the rate you're paying now, this will increase the likelihood of the benefits of moving up. The third factor simply has to do with your feelings about your present house. Are you happy with your closet space or do you find that roominess is in short supply. We all have a tendency to grow our possessions. Are you glad you have a larger lot or do you sometimes find yourself wishing you didn't have to spend so much time with your lawn mower? Maybe you have a hill or two you would like to flatten out. Are you satisfied with your kitchen arrangement and the age of your appliances? Do the children have room to play inside on those rainy Saturdays? And the fourth consideration is your pocket book and or budget.

Over the ten years you've lived in your home you have likely increased your income while your fixed rate mortgage has frozen your principle and interest payment on your house. This has given you more disposable income. You may ask yourself "where in the world has that money gone? Do you like where it's going or would it be wiser to put at least some if not all of it into a newer or larger home in a better location. It may also be worthwhile for us to look at the financial side of this equation. Let's assume you currently have an 8.5% interest rate and that you've lived in the same 20-year-old house for 10 years. We'll also assume that the remaining balance on your mortgage is $55,000 and that your 1650 square foot house has a current market value of $100,000. After all selling expenses your net from the sell of your current house will be approximately $38,500. If you purchase a $150,000 home and use the $38,500 as a down payment, your new mortgage will be $111,500 and at 5.75% the new principle and interest payment will only be $186 a month more than your old payment. One drawback to consider is that your old mortgage had 20 remaining years while the new mortgage with the lowest payment will reset you back to 30 years. The younger you are the less this will impact your estate. If you are older you may want to consider keeping your term at 20 years and in this case the payment would be $318 difference per month. Now it's simply a matter of considering if the difference is worth the benefits. The new home will likely be some 400 square feet bigger and will likely be half the age of the old house. It may very well be in a better location with a greater land value than the old house. It's also interesting that although your new interest rate is 2 ¾ percent lower, you now have a tax deduction that is $2000 greater!

One more drawback...you can't take good neighbors with you...but you can invite them to your New House Warming party and pick up some great gifts! Here are the logical steps in the process:

• Contact a member of the National Association of Realtors® for more information about "moving up."

• Ask your Realtor® to provide you with an in depth market analysis (CMA or BPO) on you current residence.

• Ask your Realtor® to perform a "mock sale" on your current residence to show you the net proceeds after the expenses of the sale.

• Ask your Realtor® to calculate the contract price of your new home using the net from the sale as your down payment and closing cost and the amount you are willing to budget for the new monthly payment.

• Ask your Realtor® to provide you with a list of homes currently available in the calculated price range.

• Ask your Realtor® to arrange for you to visit several houses on the list. How do they feel compared to your present house?

Is the difference in payment worth that feeling? You may be pleasantly surprised!