You’ve lived in your home for a while, and although you love it, it no longer serves your needs. Maybe you need more space, a different layout, more property or simply a different kind of home than the one you bought years ago. Remember how you saved for your first home and what a major accomplishment it was when you finally got to closing day? Moving up can be just as exciting — but this time, it may actually be easier. You have something you didn’t have when you bought your first home: the equity you’ve built in the house you already own.
When the Home You Own No Longer Fits
When the home you own no longer fits your needs, it may be time to make a change. That can feel intimidating, especially if this is the first time you’re selling one house while buying another. Moving up generally means buying a home that offers something your current home doesn’t, with features that have become important to you. It differs from downsizing, where the goal is typically a smaller home, less maintenance or both. In either case, the reason for moving is the same: the home you own no longer fits what you need.
Moving up isn’t the same as starting over. The house you already own may be one of your biggest advantages. As its value has increased and you’ve paid down your mortgage, you may have built substantial equity that can help make your next home possible. Understanding what your house is worth, what you still owe and what may be available after the sale gives you a much clearer picture of what moving up could look like.
How Your Current House Can Help You Move Up
One of the biggest advantages a move-up buyer may have is the equity already built into the house they own. For example, clients of ours purchased their first home in 2012 for $271,000. By the time they were ready to move up, their mortgage balance was approximately $200,000 and we sold their house for $635,000. After paying off their mortgage and covering the costs of selling, they had approximately $400,000 available toward their next home in the $800,000 range.
Their situation is a good example of why it makes sense to look at the house you already own before deciding what you can afford next. Years of home price appreciation can put a move-up purchase that once seemed out of reach into a very different perspective. Your numbers will be different, but knowing the likely value of your house, your mortgage balance and your approximate net proceeds gives you a much better starting point for deciding what comes next.
Selling One House and Buying Another
This is often where moving up gets complicated. The house you own may be providing the equity you need for your next purchase, which means selling and buying can’t always be treated as two separate decisions. You have to figure out how to get from one house to the next without creating a financial or logistical problem in between.
Start by Finding Out What Is Possible
Many of our move-up buyers first contact us because they’ve seen a home they would like to look at. During that first meeting, we usually start talking about a bigger question: If this were the right home, how would you buy it? Most buyers don’t buy the first home they see, but that conversation is a good place to start figuring out what needs to happen before they find the one they do want to buy.
From there, several things can happen at the same time. We visit your current house to determine its likely market value and identify what should be done to prepare it for sale. We also set up a home search so you can start seeing what is available, where you may want to live and what the type of home you want is likely to cost. At the same time, you’ll want to speak with a lender and become prequalified for your next purchase.
The lender plays an important role in a move-up purchase. Knowing how much equity you have is only one part of the equation; the lender can help determine what you qualify to buy while you still own your current house and what financing options may be available to you. Very often, that conversation helps determine how the move can be structured. Meanwhile, your current house can be getting ready for market, and the plan you’re putting together will help determine when it should be listed for sale.
Every move-up buyer’s situation is different, and the decision is also very personal. Your equity, financing, the markets you’re selling and buying in, and your flexibility with timing all help determine what is possible. But what works on paper also has to work for you. Some homeowners are comfortable buying first and temporarily carrying two houses, while others would rather sell first or coordinate both closings for the same day. The right plan has to account for both the numbers and what you are comfortable doing.
There’s More Than One Way to Make the Move
Once you understand the value and equity in your current house, what you’re likely to spend on your next home and what your lender says is financially possible, you can begin looking at how to make the move work. The following examples show four different ways a move-up buyer might get from one house to the next.
Here are four examples of how a move-up purchase might come together:
EXAMPLE 1
Your lender determines that you can qualify for your next home while still owning your current house. You can purchase first, move into the new home and then sell the house you already own.
You Can Buy Before You Sell
EXAMPLE 2
You have substantial equity in your current house, but that equity is tied up until you sell. If you qualify for a home equity line of credit (HELOC), you may be able to access some of that equity for the down payment on your next home. The HELOC can then be paid off when your current house sells.
You Can Use Your Equity Before You Sell
EXAMPLE 3
You find the home you want to buy, but need the proceeds from your current house to complete the purchase. A Hubbard Clause may allow you to make an offer that is contingent upon selling your current house, subject to the terms of the contract.
You May Be Able to Buy With a Hubbard Clause
EXAMPLE 4
You need the proceeds from the sale of your current house to purchase your next home. Both closings can sometimes be scheduled for the same day, with the house you are selling closing first so those funds are available for the purchase that follows.
You Can Coordinate Both Closings for the Same Day
What Is a Hubbard Clause?
A Hubbard Clause is commonly used in Connecticut when you need to sell your current house in order to purchase your next home, but your house is not yet on the market. It allows you to make an offer on the home you want to buy that is contingent upon selling your current house. The specific terms of the Hubbard Clause become part of the purchase agreement and determine how the contingency will work.
A Hubbard Clause is different from a Home Sale Contingency. A Home Sale Contingency is typically used when your current house is already under deposit and you need the proceeds from that sale to purchase your next home. At that point, you have already found a buyer for your house; your purchase is contingent upon that sale successfully closing.
Whether to sell first, buy first or coordinate the two is one of the biggest decisions move-up buyers face. Our Sell First or Buy First? page looks at each of those options and the factors that can help determine which approach makes sense for your situation.
You Don’t Have to Be Ready to Move Yet
If you’re not ready to move right now, that’s okay. Having time to review your situation with a qualified lender and an experienced Realtor can make the entire process much easier. You can understand your financing options, get a realistic idea of what your current house may sell for and start figuring out what needs to happen before you make a move.
Once the plan comes into focus, you know where to start and what to start on. You may have work to do on your current house, need time to build additional savings or simply want to watch the market and learn more about what you want to buy. Starting early gives you the time to do those things without having to make every decision at once.
Find Out What Your Current House Could Make Possible
Moving up starts with understanding what you already have and what you want next. Finding out what your current home may be worth can help you understand the equity you may have available for your next purchase. Once you know the likely value of your current house, your financing options and what you’re looking for in your next home, the possibilities become much clearer. From there, a plan can be built around your finances, your timing and what works for you.
Next Steps
You don’t need to have everything figured out before you contact us. If you’re thinking about moving up, let’s talk about where you are now, where you’d like to go and what it may take to get there.