Upgrade House?

[marathon55]

DH and I have a very healthy income...he nets about $225K a year and I make around $160K a year.  We have two kids (7 and 11), no debt other than our current house.  It's worth about $500K and we owe about $238K on it.  We are sort of "bored" and wanting to upgrade our house but the only things we get excited for are homes in the $840-$1M range.  Nothing wrong with our home..it's a decent size at 2700 Sq ft. but it's a 1978 build and we just like the newer constructions with the taller ceilings, larger garages, 8 foot basement ceilings etc.  


We have about $1.4M in retirement accounts and $490K in other stock investments plus the kids 529s... no debt, no car payments, etc.  So we are in great shape financially..other than we eat out way to much:)   We live in a high property tax area so our current property taxes are $11K and an increase in houses we like would be anywhere from $19K to $22K.   I know we can "afford it" but we keep thinking it's better to stay conservative and allow us to retire earlier or one of us to leave the work force without any real stress.. so it comes down to security vs enjoyment.  Has anyone else struggled with this?  Or make a decision like this in the past? 

[chpmnk1015]

We are always looking to.. our house is fine by anyones standards..just not our style at all. Financially we are not in as good of a position as you. We do do all the work ourselves when we renovate which is why we are getting bored... we decided unless a couple houses in town come up, we cant look... our kids have another 7 years or so in school here..
Taxes are stupid where we live..
If we had more disposable income though we prob would look

[goldengirlz]

It really comes down to your overall priorities. As someone who’s never lived anywhere longer than four years my entire adult life, I’m just not that enamored with having a “nice” house. We’ve lived in some beautiful places (a 3500 sq ft classic colonial, a new construction apartment with a pool and knockout views, a townhouse in a historic area, etc.) — some we owned, some we rented — and I realized that I just don’t care THAT much as long as it’s not too far from work and offers some quiet from the neighbors. Because (pandemic life notwithstanding) we’re not really homebodies. There’s also no world where I’d rather have things like high ceilings vs. (say) a larger travel budget.

Other people like to entertain and their houses serve a more central role in their lives.

So I guess I’d ask yourself what a house upgrade would really “get” you — other than something more aesthetically pleasing or bragging rights.

[simpsongal]

Yup, we've struggled with this.

We financed an addition with a HELOC and savings and plan to do more home improvements. It took some convincing DH to do all this b/c he seemed fine to just live in our home in its dated condition and didn't want to take on debt. But he's getting much more enjoyment over the improved spaces and function of our home (esp since we're here all.the.time during covid), and we're taking our time so we don't overextend ourselves. I like DIY projects, so designing improvements and doing a mix of DIY and hired improvements makes me happy on a personal/hobby level.

If I were you, I would tour some new homes and see what's really out there. Calculate your new payment, figure out how that would impact your budget and if it's a tradeoff you want to make. One tradeoff in our HCOL area is that families in expensive homes tend to have older kids, even college aged. A lot of younger families can't afford pricey homes - DS has a couple friends in $$$ neighborhoods and there are no kids.

[dr.girlfriend]

I think you can afford more, but I would personally be more interested in building or renovating something I actually love that's sized right so I wouldn't end up with seven bedrooms that go unused, huge utility bills, a ton of house to have cleaned or landscaping to maintain, etc. We renovated our house to have an age-in-place master suite and solar on the roof, which was more money than we should have spent for our neighborhood but reflected our priorities. We love our walkable neighborhood with lots of kids. That said, if I could buy something right downtown and have a little jewelbox of a 4-bedroom craftsman with lovely outdoor space, I'd probably do it.

I was talking to my neighbor a few blocks away -- I take my dogs to play with hers every day -- and she was like, "I know the guy next door is in trouble if his flag is out after dark, and I know across the street they are okay as long as they have let (their dog) out, and everyone knows I'm okay if they see (her dogs) in the yard, but I haven't seen X for two days so I checked and she actually had a stroke and is staying with her daughter..." I hadn't realized how important that sense of community might become as we age, especially if DH or I end up living alone. Unless you're right in the heart of a city I think million-dollar houses usually mean lots of land and no close neighbors.

[savan]

We've put a lot of money into home improvements. We purchased our home with the intention of living here long term and have been upgrading it to fit our needs. We've done the kitchen, bathrooms, finished the garage, put in a pool, new flooring, interior and exterior painting, and we are currently having a front patio put in. All this was done with cash spread out over the past 11 years. We haven't regretted any of it.


ETA: Oh lol.  After reading the responses, I realize you meant upgrading as in buying a newer, more expensive home, not upgrading your current house.  Never mind 

[flygirl]

We upgraded 5 yrs ago and there are days I think geez, my old house would be paid for now, but I don’t regret it. We however only went about 125k over the original house cost, so not as substantial of a jump. The yard alone makes our new house much better. I would try to figure out what is most important to you and if you can’t get that with your current house I would consider moving. We toured a ton of houses to figure out what we wanted before we bought our current house-thru open houses or parade of homes.

[aprilsails]

We upgraded to our “forever home” 2 years ago. It is a new build in a small commuter town (like 3k population) and has everything that we want. It cost us $750k at the time, and is as high as we will want to extend ourselves on our current salaries. We could afford to go to $1M, and could have bought closer to our parents (who all live in what are now $1M+ homes) but we didn’t want all the extra space and yard work.

I’m not against upgrading obviously, and I think your salaries could support the move. The only question really comes down to priorities. We opted for the middle road, which I think is going to suit us very well. It was not easy to find though. Seems as though housing stock goes from 2200sq ft to 3500sq ft with very few options in between.

[noodleoo]

I think about this a bit. Our house is nice and definitely good enough, but I would love more space and a "fancier" house. But it is cost prohibitive for us, especially because I choose to work part time. If I went back to work full time, we could potentially upgrade, but it would not be worth it to me. I love my low stress lifestyle of working part time.

[Pilsy]

We aren't in the exact same situation, as even without doing anything, we aren't able to cut down to one income without really cutting back on retirement and college savings, which we don't want to do. However, we are very fortunate to be comfortable and not have any debt other than our mortgage, and I do sometimes fantasize about a newer, nicer home.

We are planning to do some renovations, which will address some of the things I'd like to change, and then some others are things we'll just live with. For example. I have wanted a better kitchen layout and a mud room for years, so I think we're going to spend the money and make those happen; we look at this as an investment since the return on those improvements tends to be good, and we get to enjoy them before eventually cashing out. But my house was built in the '60s and will forever have small(ish) bedrooms no walk-in closets, and a garage that's a tight fit for our two cars.

Maybe a compromise by doing some renovations is the answer for you, too.

[marathon55]

Thanks. All these comments are helpful, even if it's just talking out loud to anonymous folks! If we stay we are going to upgrade our kitchen and modernize the features of our first floor. I think a lot of our hesitation is based on coming from very blue collar families and we both are nervous about making a purchase or decision that we will regret, we were just talking about how we still have the mindset that every time we tour a home that costs $750K+ that it's for super high earners and not us..even if we may make a similar income, etc. Or its one earner vs us two.

The one blessing is our market has suddenly heated up so while we will sell high, we likely will have to buy high and that is something we wanted to avoid.

[lolalolalola]

As others mentioned this is 100% personal prioritization. We have a much more expensive house than we need because we have wanted to live in a certain part of town and had certain requirements for our home. (Our house was more than yours and we have a lower net worth than you). We recently looked at building an even more expensive house but decided the benefits from that house didn’t outweigh the increased financial burden.

We are homebodies, our kids are too. So we prioritize spending more on our home than many simply because we spend a lot of time there...

[sadlebred]

I'm actually priced out of my community. Even if I wanted to downsize, the houses would be significantly more than I'm willing/able to pay. The only thing I could do is buy a condo, and I don't want to live that close to my neighbors. So, I'll stay in my house for years to come unless I move for a job/because I want to. It meets my needs although I'd love to be able to afford to do some renovations on it at some point.

[ellipses84]

I definitely support spending money to be in a house you love, whether that is renovation or something new, but doubling your house payment and taxes is a huge jump. I’d keep your eye on the market and see if something great shows up for less cost. I’d be concerned about high taxes in retirement, and that you may want to downsize.

Location and great neighborhood are more important to me than house size, and I’d rather take great vacations than spend a lot on housing, although I want nice furniture and entertainment space (in a warm climate that’s a backyard patio). What is working for you and what are the problems in your current house? Will those always be problems (like more space for kids that will move out in a few years)? Can they be solved with a renovation or a move/renovation in a $600-700k house? FWIW the people I know with huge houses hate the maintenance / cleaning expense, but entertain large groups (pre-Covid) a lot so it is worth it to them. Will you want to downsize later? Is a new house a better setup for old age?

[imojoebunny]

We upgraded our house 7 years ago to what you are describing. We kept the mortgage, so it was only about 20% more than our previous mortgage, though the taxes are about double. I don't regret it. My DH just retired, and I haven't worked in a long time. For us, we could afford it, and the house is a better investment generally than a car or something else that depreciates.

[Beeps (WOT?*)]

We decided to not uproot and move. We have two adopted granddaughters and when they moved in with us we didn't want to leave the school district or the local friends they developed. That was more important than more house than I wanted to keep clean. The grands are in high school so technically we could uproot and move, but we are closer to retirement than a move would warrant. But there is a *lot* we would like to improve about this house...and so now we are, with 10-15 years left to live in it before we sell.

We're considering instead a second/weekend home rather than upgrading the one we have to bigger, shinier, flashier. We're in a good school district, good part of town, good quality of life, etc. Not moving or upgrading has afforded us the ability to pay off our current mortgage, set aside money for the grands' college (we adopted right at that time when it was only a few years out but they don't qualify for older-adopt scholarships, etc), put a lot more into retirement than we otherwise would have (we got a late start due to school loans and smaller incomes in days past) and so forth.

You're in a good place but when your kids move out, what are your plans for the big house? That was what kept us in the smaller house. We didn't want to upgrade, only to downgrade a few years down the road, which is what weighed into our decision. (We'd move into a one-story in a nicer neighborhood with a water view or a mature lot, but that's pretty much the only scenario in which we would consider moving...in four years after they're both out of high school.)

[janegold]

Like others have said, it really all just comes down to priorities. Having a nice, comfortable home that our family could grow in was important to us when we were buying our house last year. We are in a HCOL area where anything under $800k is basically a starter home and that's just not what we wanted. We ended spending more (quite a bit more) than we had planned, but I don't regret it.

Do be aware, though, that in a more expensive home, EVERYTHING tends to be more expensive - the utilities, the maintenance, the insurance, the furnishings - conceptually I knew that going in, but it still a bit taken aback.

[Cappy]

Mar 25, 2021 12:00:32 GMT -5 janegold said:

Like others have said, it really all just comes down to priorities. Having a nice, comfortable home that our family could grow in was important to us when we were buying our house last year. We are in a HCOL area where anything under $800k is basically a starter home and that's just not what we wanted. We ended spending more (quite a bit more) than we had planned, but I don't regret it.

Do be aware, though, that in a more expensive home, EVERYTHING tends to be more expensive - the utilities, the maintenance, the insurance, the furnishings - conceptually I knew that going in, but it still a bit taken aback.

In our "big fancy house" all repairs seem to have a 20% higher rate than would be typical. I get contractor comments like "In a big nice house like this you want/need..." or "In this neighborhood you want..." Talking to the neighbors, they have had the same experience. I don't think it is necessarily that we are being ripped off but contractors assume you are accustomed to better quality or prestige and value that over price. They also try to upsell more. Our last home was very much a starter home in a cookie cutter neighborhood and the new place is a custom home on a golf course. 

[fryjack2]

Mar 25, 2021 12:00:32 GMT -5 janegold said:

Like others have said, it really all just comes down to priorities. Having a nice, comfortable home that our family could grow in was important to us when we were buying our house last year. We are in a HCOL area where anything under $800k is basically a starter home and that's just not what we wanted. We ended spending more (quite a bit more) than we had planned, but I don't regret it.

Do be aware, though, that in a more expensive home, EVERYTHING tends to be more expensive - the utilities, the maintenance, the insurance, the furnishings - conceptually I knew that going in, but it still a bit taken aback.

I tell coworkers house hunting from the city to the "burbs" that they need to factor in another mortgage payment a month.  If you triple your space, your heat bill, electric bill, water bill, etc. will also triple.  You have a yard to maintain, gutters, snow, rooms to furnish, etc.  

I miss my loft so so so much.  But my H loves our yard and his home office. Especially now. 

OP- we can also afford a "nicer" home, but our market is insane and our home is fine.  We had to compromise on a few things. We live on a busy street but have a large yard that's hard to find here, and can walk to lots of things.  The house is bigger than I would have wanted, but we now have a real guest room, a gym, and H has an office which has been great this last year.  Could we have spent more? Can we make more upgrades?  Sure, and we would have if this had been our forever home. But it isn't.   The money we saved/are saving is going towards a vacation home and traveling, which we love to do.  If spending more to get what you want is a priority, do it.  If it won't matter much, I wouldn't.  Home prices, and labor costs are crazy right now.  It impacts my perception of what a want and a need is when I look around at my own home and its projects

[lolalolalola]

Upgrading to me does not mean increasing size. We wanted to upgrade our home to a more expensive one. We currently have 2700 sq feet and it’s too big! We want a smaller, higher quality home on a nicer lot. We are looking at building because one of our requirements is a 3 car garage and it’s almost impossible to fine a house with a 3 car garage under 3,000 sq ft in our area.

[beachdweller]

We were you 9 months ago.  We went from a 660k house to a $1M house.  I was initially very hesitant to take the plunge (I grew up low income and am very conservative with finances).  I got to yes by deciding to pull 200k from savings and that, along with the gain from the home we sold, resulted in our mortgage only increasing about $600 per month (although we of course were adding years to the mortgage). Our kids are 2, 7 and 9 and the new space has an amazing view, a pool and plenty of space.  We were like you and in good shape retirement wise and have a decent jump start on 529 savings so decided to go for it.  Fast forward, and I am so glad we did it.  Our prior home was fine, but I really enjoy spending time in our new home and I think it will be great as we get to the teenage years.  Good luck in your decision!

[sandandsea]

We made the decision to move to a bigger, nicer house 6 years ago and double our taxes, mortgage etc. It’s been totally worth it and the right decision for both quality of life and financially. This house has increased more in value than our old house in the same period.

The number alone stressed me out as our first house was more than any house I had ever known anyone to buy (SF vs Midwest prices) And the new house was more than double our first house. We saved the difference for a year and knew we could afford the additional expense which made me a lot more comfortable in house hunting but It was still nerve wracking.

[marathon55]

Thanks again everyone.. It's great reading perspective on both sides. We still don't know what to do but I do know that we tend to default to not moving forward with a decision unless it feels like a slam dunk yes... so my guess is we will enjoy saving and plugging more money into the market each month until we both feel like it's a no-brainer. It does help growing up in 1100 sq ft house with very working class folks so everything gets quickly put into perspective.

[notsopicky]

Mar 25, 2021 12:00:32 GMT -5 janegold said:

Like others have said, it really all just comes down to priorities. Having a nice, comfortable home that our family could grow in was important to us when we were buying our house last year. We are in a HCOL area where anything under $800k is basically a starter home and that's just not what we wanted. We ended spending more (quite a bit more) than we had planned, but I don't regret it.

Do be aware, though, that in a more expensive home, EVERYTHING tends to be more expensive - the utilities, the maintenance, the insurance, the furnishings - conceptually I knew that going in, but it still a bit taken aback.

I was expecting WAY higher utilities/insurance/etc. costs when we moved from a 1500sf home to a 4500sf home 6 years ago. Turns out, that wasn't exactly the case. Our electric bill went down, not by a lot, but enough that I noticed it, b/c of the way the new home is laid out (it seemed like our AC ran 24/7 at the old place, b/c it was a ridiculously tall TH). Our water bill basically stayed the same, save for watering the lawn, b/c we were still the same amount of people living in the house. The company I used to use for cleaning charged ridiculous rates; I was able to get a company for 1/3 the price at the new place--for 3X the space. Our HOA is way less; the only thing our old neighborhood included in the monthly charge that our new neighborhood does not is a community pool, that we didn't take advantage of enough anyway, so not much love lost there. Internet rates are the same, as are the cable rates (we have since ditched cable, but have streaming services). 

All of that to say that (thankfully) it's not automatic that utilities will go up; each individual's home will dictate. I was extremely concerned about this very thing when we first moved and have been reassuringly surprised at what the bills actually are. Of course some things are a little more, but I was expecting an exponential rise and didn't experience that. 

[aprilsails]

Yes we moved from 1600 sqft 20 year old house (with new furnace and AC) to 2700sqft new construction house and our utilities are exactly the same. The new house is far more efficient and has much better insulation. We also invested in $$$ blinds which help immensely.

[Cappy]

Yes to the utilities aprilsails, notsopicky, we went from 1800 SF to 5000 SF and our utility increase was only around $50/month. Better quality construction and a design that allows for passive solar heat gains in the winter

[shaynaatl]

As others have said, this is all about personal preference. We've chosen to live in nicer, newer homes, and have no regrets. We are on target with our savings goals, so having a bunch of additional money each month wouldn't be a huge deal to us (we aren't focused on early retirement).

I was raised in a bare-bones 2 bed/1 bath condo, so this could also just be over-compensating for that experience.

[Susie]

We just went under contract yesterday to trade up.  Our current house is 4 beds / 1.5 baths / 1860 sf.  We bought in 2008, and it's kind of in between being a starter home and a long term home.  We thought it would be long term, but we ended up outgrowing it.  We have 2 kids now and my widowed dad is thinking about moving in with us, so we've gone from 2 people to 4-5 people, and 1.5 bath doesn't cut it.  Neither does a 1 car garage, no mud room, and only a partial basement, of which part is devoted to laundry.  

So we are moving 3 miles away, for 4 beds / 2.5 baths / 2200 sf, 2 car garage, mudroom, full basement.  It's providing functions we need as a family, along with some perks.  Larger yard, etc.  It's also a more expensive neighborhood, where we'll have a relatively older/smaller home, rather than sort of maxing out the ceiling on improvements.  

I've admired nicer houses for a long time, but I wasn't ready to pull the trigger on moving until there was function I really needed, and could not realistically get in our existing house.