Money Monday: Should you upgrade from a smaller to a larger home?

Buying a house instead of renting is, depending where in the country you live, often more cost-effective. But upgrading from a smaller home to a larger home and mortgage? Probably not.

small house to mansion

“There are solid reasons to upgrade your home. For many, it was always the plan. You buy a starter home, and upgrade to a larger one once your family expands. Or your income expands, and you finally move into your dream home. Regardless of your reason, the typical first step is determining what you can afford. A standard rule for lenders is that your monthly housing payment (principal, interest, taxes and insurance) should not take up more than 28% of your income before taxes. A quick and dirty way to check how much you can afford is through calculators like myFico calculator.

“Lenders asses your monthly income, debt, credit score and a variety of other factors to determine how much you can “afford”. However, they don’t look at how your expenses will grow after upgrading to a bigger and better house. (“Forbes.com, “Upgrading to a bigger home? Beware of 6 expenses that will increase.”)

Read Forbes’ article on the 6 things that will increase with a larger place here.

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