Last updated October 4, 2021
The kids are getting bigger, the stuff is multiplying… should I buy a bigger house? When my husband and I were first time home buyers, we drove by all kinds of lovely homes we thought looked ideal for us. Then we found out how much we could afford… to finance. We realized picking out a house that looks more like something we lived in when we graduated high school (i.e., something our parents afforded about 20 years into parenthood) was not reality.
We needed a house that looked more like the house we came home to as babies, when our parents were young and broke-ish just like us! Don’t get me wrong, I’m all about real estate. We own two houses currently. That first one we bought in 2010 and has been a rental property since 2012. The second one we bought at the end of 2014 and is our current home.
But when our eyes are bigger than our stomachs, so to speak, this most expensive purchase of our lives has the potential to dramatically impact our lifestyle (i.e. how you spend that precious limited resource of time) going forward. Will you be happy to be locked into a job burning you out in three more years to pay for your 4,000 square foot house that you thought you needed when baby #2 was on the way? But perhaps more importantly than the cost itself, exactly why do we think we need or want a bigger house? That’s really the question you must analyze.
What's In This Post
The cost of (minor) upsizing vs. staying
On average, a home with one more bedroom may cost 30-50K more. Let’s just work with the low end to be conservative. What’s the other bedroom for- an office? guest use? play space? hobby room? Another baby for each child to have their own room?
Moving to a new home and financing just an additional 30K over and above your current home’s worth into a 30-yr mortgage will actually cost you an additional $2,800 per year compared to staying in your current house (assuming a 250K home purchase vs your 220K valued house you bought 5 years ago for 200K, and interest rate of 3.75%).
That is an extra $14,000 spent after 5 years living in your new house. Of that extra $14,000, almost all of it (about $13,000) is just additional interest paid, not additional equity, compared to paying down year 6 through 10 on your current home. Remember, the highest proportion of the loan’s interest is paid on the front end of a mortgage. So each time you move and get a new loan, you start over again paying majority interest! And that’s just for an example of getting an additional single 100-150 square foot bedroom, buying something about 14% more expensive than your current home value, not scaling up your entire house.
Perhaps $2,800 more (about $230 larger monthly payment) towards mortgage payments each year doesn’t sound like much for that one more bedroom, but be sure to consider that amount in the context of other quality of life factors. That amount could pay for house cleaning twice a month, for example. Or it could pay for annual vacations. Or maybe you’d rather invest in decor and furniture to make your house work and feel better.
Creative thinking to solve space problems
Rethink how rooms are used
The ‘one more room’ example is helpful in thinking about what exactly it is you are after. Perhaps investing in a top of the line convertible wall bed to desk ensemble for a few thousand dollars will create the ideal office and guest room combination that will serve your purposes just as well as having a separate room for each? And with one less room to clean!
Or convert one of your kids’ rooms to be mostly used as a playroom by switching to a small pull-down bed that can be used when needed, but let the kids primarily share the other room using bunk or trundle beds. There’s a chance you could find a new level of sibling togetherness and comradery by considering these types of options.
There are no rules to how home spaces must be used. YOU decide what makes your current family situation work and create that reality. Sometimes more rooms or square footage isn’t the simple solution it promises to be.
Too much stuff is not a space problem
If the problem is stuff. Stuff everywhere. Then the problem is usually the stuff and not the size of the house. Sometimes I think if we moved, well, at least we’d have to touch every item in our house during packing and would then finally let go of a lot of it. This is obviously nonsense, as I can get rid of things without the threat of having to pack it in and out of a truck. But it’s a helpful thought exercise.
If you were to move to a bigger home, how much of your current house contents is worth bringing with you? Would you have to spend a tremendous effort offloading before you packed? What proportion would go straight to the new house storage area and not even get unpacked? Or would you genuinely be thrilled to have a proper place in a larger home for all these items exploding in your current set-up? I know for me, moving would force my hand at letting more stuff go, so I know it’s really an issue of cleaning out unimportant forgotten things, more so than lacking space for important things.
Personally, I would like to build a small (roughly 1,000-1,500 square foot) one-level home someday with a highly efficient and flexible space configuration. I actually prefer a small kitchen, for example, because I like to have everything a step or two away. So even though I don’t love our house layout much at all, for us, moving to some other house in between just doesn’t make financial sense since the transactional costs of real estate are so high (fees of selling plus the interest costs of restarting a new mortgage). So until we’re at the point of owning acreage and building our cool little house, I continually reconfigure this one to work for us more optimally.
Hit reset by rearranging your rooms
It seems about every year some new configuration comes to mind because that’s how often our needs and lifestyle change with very young kids. The living room was a living room with a sofa, coffee table, as well as our computer desk, when I was pregnant with #2. When she started crawling and walking, the living room was converted to a penned off, toddler proof, toy zone.
About a year and a half later the baby gate wall came down and it was back to a living room hybrid, with the computer desk staying in the basement to accommodate a few tasteful toy storage zones for a friendly family living room. Not done yet! Another year later with the addition of a global pandemic, that room got two desks for my (suddenly remote) job and our older kiddo’s schoolwork, and the sofa was completely eliminated to accommodate our old dining room table and a cabinet we snagged from under the basement TV to use for puzzles, games, craft supplies, and homeschool supplies… all the new family activities that pandemic life brought to front and center.
In doing so this last round, we completely moved everything out of the basement family room (a space I’d pretty much just stopped looking at it was so messy and overloaded), had the carpets cleaned, and did a fresh ‘move in’ with a new layout to better fit a smaller TV and sofa nook and a dedicated, separated sewing area. We accomplished this rework thus far with no additional furniture purchases, just moving around what we already had in the house.
I realized just totally moving out of at least one room was a good ‘fresh start’ technique to get control of our space and make it work better for us. And much more feasible than moving houses just to hit the reset button!
If you still want to buy bigger, do it money smart
On the flip side, if you are viewing your real estate purchase as an investment in a stable, reliably appreciating market area, and you truly want a larger house (with the more cleaning, furnishing, etc that goes with it), then having something more expensive that you can well afford may be a great idea for your family.
In determining whether you can well afford your larger dream home, I like the threshold of only upsizing if you can afford to buy it with a 15-year mortgage and 20% down. Starting over with a new 30-year mortgage (assuming your first home was probably a 30-year mortgage) and restarting the front-loading interest is not an optimal approach if you’re truly in an ‘investment’ mindset.
Perhaps you can afford a bigger house, but just be sure to do the math (or reach out to me to help!) to make sure the costs are actually worth it to you.
In conclusion…
Ultimately, choices with your money are not inherently good or bad. There’s no right answer to when or whether you should upsize your home. I just want to challenge the narrative that once you have kids or once you make a certain salary, it’s time to scale up. At one point not long ago, all families lived in substantially smaller homes than Americans do today. There is not something inherently wrong with doing so.
The question is really what do you want to spend your hard earned dollars on and whether bigger really accomplishes the better you are looking for. Spend the time thinking of exactly what it is you want in a home, how much of that is temporary, and whether there are other options for achieving many of your current needs in your current home through strategic furnishings or even some renovations. This rethinking may turn out to be a very worthwhile investment of your time and may even save you from feeling dissatisfied yet again a few more years into a new, more expensive home.