Why buying a big house is a bad idea

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Five years ago, Christopher Charles sold his house in Kansas in the US and moved his family into a bigger, better home nearby.

The family was attracted to the idea of more space, newer construction and living in a better neighborhood close to school for their children, then aged 10 and 13. The new house was also valued at three times the price of his old home.

Before upsizing, Charles had budgeted for the increase in his mortgage payment, factoring in his salary and tax credits, but he hadn’t considered other expenses: supplies and tools for repairs, furniture and appliances to fill the space, and costlier upgrades due to the bigger size.

Then there are the time costs, including gardening, cleaning and maintenance. “Sure, you can pay contractors to handle some of this sort of stuff, but that’s just more money out of your pocket,” said Charles, 35, who finds, among other things, that taking care of his new garden is more time consuming. “The yard is quite a bit bigger, and there is more pressure to keep it mowed, edged and weed-free because everyone in the neighborhood has such a nice yard.”

In retrospect, Charles said he might have chosen a different house. “My advice is to not buy the biggest and nicest house you can afford,” he said. “The money and time you save can be used on upgrades, contractors or even better — invested.”

My advice is to not buy the biggest and nicest house you can afford.

That said, plenty of people dream about a larger home. Of US adults, 43% say they would prefer homes bigger than where they currently live, according to a survey by real estate site Trulia. And two-thirds of Britons hope to move into a larger home, according to Post Office Mortgage’s Step-up report.

“It’s a very normal phenomenon in any real-estate market,” said Svenja Gudell, chief economist for US real estate site Zillow. “You start out with a smaller house because your needs are smaller. After a while, you have child number two, or child number three, and you want a larger yard. Life changes, so your house needs end up changing.”

If you yearn for more living space, here are a few things to keep in mind:

What it will take: Purchasing a large house requires due diligence beforehand. “Those considering a step up the rung should make sure they do all of their research on the cost of moving, such as stamp duty, legals, surveys and the ongoing costs of running a larger home,” said Lawrence Hall with Zoopla.co.uk, a UK residential-property site. “That includes mortgage payments, gas and electricity bills, as well as a likely increase in buildings and content insurance.” And of course, there are property taxes, which will generally be higher for a larger home.

Purchasing a large house requires due diligence beforehand.

How long you need to prepare: You’ll need time to complete the sale of your current home and long enough to purchase a larger property, which can take six to 12 months or longer, depending on where you live. But you should also take some time before you start the process to make sure you can really afford a bigger place. “The idea of upsizing can be romantic — having more space, more storage, and just the all-around idea of not living so confined,” said Monica Ma with US real-estate site Trulia. “But consumers should also consider the costs that come along with a larger space.”

A bigger home is nice, but there's a financial tradeoff to consider. (Credit: Alamy)

A bigger home is nice, but there’s a financial tradeoff to consider. (Credit: Alamy)

Do it now: Run the numbers. If you’re already a homeowner, you’re aware of the costs of maintaining a property, from utility bills to upkeep. But some of the expenses of a bigger home may surprise you. “All of a sudden you have a much larger driveway, so you probably have to hire someone to do the snow blowing for you, and you have to get a gardener in because you can’t mow the acre lot you have,” Gudell said. “These can be expensive ticket items and people’s time is limited and you can only do so much during the day. Size brings extra maintenance.”

The age of the home also has a bearing on the cost of upkeep. Some older homes require more maintenance. “There could be additional costs you haven’t considered, like changing out the water heater or replacing the roof,” Gudell said.

Remember transaction costs. Unfortunately, selling your current home and buying a new one aren’t free. Those deals come with realtor fees, mortgage fees and moving costs. Consider whether you’re going to stay in the new house long enough to make it worth your while. “If your time horizon is short, I would consider staying in your current home and making that work,” Gudell said.

Think about resale value. In some US cities, smaller homes in more urban locations are selling faster than larger homes in the suburbs. So if you’re upsizing to a manse on the outskirts of town, it could take a while to offload your property if you choose to sell it. Make sure you consider whether the home has other qualities that will attract buyers, such as proximity to good schools, access to public transportation and an appealing neighborhood setting.

Save up for the unexpected. No matter how much you prepare, you simply don’t know what expenses may pop up. “The need for a $5,300 house-wide water filtration system was a surprise to our checkbook,” said Andy Walker, 48, who moved from an 1,100- sq-foot (102-sq-metre) house in Toronto, Canada, to a 2,950-sq-foot (274-sq-metre) house in Florida.

Garden care has also been an issue for Walker, who runs two businesses and must hire help. “It’s $60 a month for grass cutting, $35 per month for termite and bug spraying and $45 for fertilizing and tree care,” he said. “We have palms in our front yard and if you don’t tend to them, they die easily and cost $300 to $600 to replace.” That doesn’t include the $5,000 fence the family is going to install to keep their pets and two-year-old son away from a nearby lake — which is home to an alligator.

Do it later: Take your time with the decor. Just because you doubled your space doesn’t mean you have to double your furnishings right away. “We lived for the first year with empty rooms because we [couldn’t] afford new furniture,” Walker said. “We still don’t have bedside tables.”

Beware lifestyle inflation. A larger home also doesn’t have to lead to a nicer car or fancier vacations. If you use your new address as an excuse to splash out on bigger and better stuff, you may find yourself in dire straits financially. (Remember retirement? Keep saving for it.)

It’s not always necessary to move house to get the space you want.

Do it smarter: Weigh the cost of a renovation. It’s not always necessary to move house to get the space you want. “In some cases, choosing to stay put and improve and add value to a home can be an option,” Hall said. “Researching the likely costs of building works and improvements and what the subsequent value of a home may well be is essential.”

Plus, a renovation allows you to stay put if you love your commute, community and surrounding areas. “However, keep in mind the health of the structure of the home,” Ma said. “Sometimes an addition on an older home can require more work, more time and more money than moving to a larger home.”

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