If you're considering moving to a bigger home, you're likely feeling more experienced than you were as a first-time buyer. However, upsizing comes with its own set of challenges, from navigating the housing market to affording a larger mortgage. Whether you're looking for more space for a growing family or seeking a home upgrade, it's important to understand the costs and implications of moving up the property ladder.
Rising House Prices
House prices are currently increasing at their fastest rate in over two years, with an average growth of 3.2% over the 12 months to September. While rising house prices can benefit homeowners by increasing the value of their property, this also means that upsizers may face higher costs when purchasing a larger home.
One key factor to keep in mind is the potential difference in price growth between different types of properties. For instance, over the past five years, flats have seen an average price increase of 14%, while detached houses have risen by 26%. This means that if you're moving from a flat to a detached home, the gap between what you can sell your current property for and the cost of a larger home may be significant.
Can You Afford a Bigger Mortgage?
Upsizing typically requires a larger mortgage, and while you may have a higher salary now than when you bought your first home, other financial obligations—such as family costs—can affect how much you can borrow. Lenders will conduct an affordability assessment to determine how much you can borrow based on your income, expenses, and any savings you can contribute to the deposit.
If you're looking to move to a bigger home, it's important to factor in not only the mortgage but also additional costs such as stamp duty, estate agent fees, and the higher monthly payments associated with larger mortgages. For example, moving from a flat worth £236,000 to a detached house valued at £443,000 could result in a significant increase in your mortgage payments, especially if you're switching from a lower interest rate secured in previous years.
Higher Mortgage Rates
Many homeowners considering upsizing are currently on mortgage rates secured before interest rates began to rise in late 2022. While mortgage rates ranged from 1.5% to 2.5% just a few years ago, current rates are between 4% and 5%, meaning higher monthly payments for those needing to borrow more.
For example, if you're moving from a £200,000 mortgage at 2% interest to a £400,000 mortgage at 4.5%, your monthly payments could more than double. This jump in costs has led some homeowners to reconsider their plans and either delay their move or opt for a similarly priced property rather than a larger home.
Early Repayment Charges
If you're currently on a fixed-rate mortgage, it's important to check whether there are early repayment charges (ERCs) before you switch to a new mortgage. These charges can range from 1% to 5% of the outstanding mortgage amount, depending on how much time is left on your current deal. Timing your move to coincide with the end of your mortgage term can help you avoid these fees.
Porting Your Mortgage
Some homeowners may be able to "port" their existing mortgage to a new property, meaning they keep their current mortgage terms while increasing the loan amount to cover the cost of the larger home. However, this isn't always possible and depends on your lender’s criteria, the value of the new property, and your current financial situation. Porting requires a new mortgage application, so be prepared for a credit check and potential additional fees.
Additional Costs of Moving
Unlike first-time buyers, those upsizing their home will typically face stamp duty costs. Currently, home movers pay stamp duty on properties costing more than £250,000, but this threshold will drop to £125,000 in March 2025. This means that if you're buying a £250,000 home now, you won’t pay stamp duty, but from March, you’d face a £2,500 bill. If you're upsizing to a £500,000 property, stamp duty will increase from £12,500 to £15,000 in 2025.
In addition to stamp duty, you'll also need to account for estate agent fees, moving costs, and potential renovations or upgrades to your new home.
Final Thoughts
Upsizing is an exciting step, but it comes with financial challenges. Higher mortgage rates, increased stamp duty costs, and additional moving expenses can all affect your decision. It's important to carefully assess your finances, explore mortgage options, and consider the timing of your move to ensure you can comfortably afford your new home.
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