Moving Up: Dream House or Money Pit?

A bigger house means bigger expenses you may not have thought about

There are many reasons to purchase a larger home. Maybe your family is growing, or you want more space for a home office, which became necessary for many during the Covid-19 pandemic, or more outdoor space for entertaining. Larger homes are not always cost-effective for buyers, but you should be financially prepared if you plan to purchase one.

And for those, who don't mind the less square footage of a smaller home but desire extensive amenities, such as a pool, eco-friendly outdoor space, and a high-end kitchen may cost as much as a larger home. The popularity of the "McMansion" may have waned in the last decade. Still, there is always a market for luxury real estate, and those homes come with higher mortgages, electricity bills, taxes, and other expenses.

Key Takeaways

  • Time commitment and costs are two key factors to purchasing a larger home.
  • Landscaping and maintaining a pool can be very expensive.
  • Bigger isn't necessarily always better, but smaller can still be expensive if you buy a modern home with a variety of fancy upgrades on a large piece of property.
  • If you plan for higher expenses and lived with the reality of them for half a year, you may be ready to invest in a larger home.
  • A bigger home often means a larger monthly mortgage payment due to a higher home loan.

Managing a Bigger Mortgage

Big houses also tend to come with big mortgages, which could run you several thousand dollars a month, depending on the home. In addition, a bigger space will require more money to heat and cool. You won't be caught off-guard if you plan for the new expenses.

While the size of the mortgage and the cost of utilities are items that you are likely to consider before making a move, there are many other factors to consider. They fall into two categories: time and money. These categories are closely intertwined.

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The Time Commitment of Upkeep When You Upsize

The responsibilities and the time commitment required to address them both rise directly in proportion to the size of your new home. What once seemed like a great idea can soon become a burden. The rise in demand for outdoor space and amenities, driven by the Covid-19 pandemic and quarantine rules around it, saw a reimagining of great eco-friendly and well-designed yards, swimming pools, kitchen gardens, trees, and firepits. These amenities can come at a high premium, and the actual property a home sits on will cost you money to maintain.

Without help, you may find your free time is filled with home maintenance chores and outdoor yard work. If you need assistance, it can be a surprise to know that maintenance on high-end lawn care equipment from tractors to snowblowers may set you back a few hundred dollars and pay someone to do the actual work. Add in amenities like a hot tub, swimming pool, outdoor kitchen, sod, and some decorative stonework for a patio, and the maintenance bill could rival a mortgage.

McMansions, typically with multiple garages, mix styles on a too-small lot
McMansions, typically with multiple garages, mix styles on a too-small lot. Photo by Karen Hatch/Moment Mobile Collection/Getty Images

Don't Forget the Garage

Before you go inside to rest and figure out how to pay all of your new helpers, take a quick look at the garage—or rather, what's in it. Fancy storage units, specialized oil-resistant flooring, and even flat-screen TVs can be found in a converted modern garage.

In addition, if your home comes with two or more garage spaces and substantial homes may have them, you could turn one of them into a living space or recreation area, or even a home office. Upgrading them into useable space beyond parking your car could cost you tens of thousands, or even hundreds of thousands, depending on the design and amenities.

Taxes on a big new house can be the equivalent of a mortgage payment on a smaller property.

Hiring Help

The time and effort required to keep your new home looking good can become overwhelming. After all the grass cutting, snow removal, and house cleaning, you might decide that you've had enough and want to hire some help. But help costs money. For example, according to Indeed, housecleaners earn on average $16.29 an hour, and higher in some states and cities. A lawn maintenance worker can run approximately $15 an hour, and pool servicing could cost between $80 and $150 a month.

Repair Work

The direct costs of time and money also apply as the property ages. Maintenance and repairs come in proportion to the size of the property. A new roof on a large home costs more than a new roof on a small home. New carpeting in a large home can easily cost tens of thousands of dollars. Repairs to stone and stucco can severely dent almost any budget. Remodeling a large kitchen costs more than remodeling a small kitchen. Updating a large bathroom costs more than updating a small bathroom, and so on.

Test Drive a New Budget

Now that you're thinking about the costs associated with your move, it's time to create a "new" house budget. While this may seem like a lot of effort, it is just a fiscally prudent approach. Before buying an expensive new home, live with its expenses for six months to a year. Allocate your money accordingly (you can park the cash temporarily in your moving fund). See whether you're left with enough money to feel comfortable. This exercise will drive home the value of truly understanding your finances.

Should I Buy a Bigger House?

If you feel you need more space, you shouldn't necessarily purchase a bigger space. Sometimes extra space can be achieved by moving around furniture in your current home, converting an attic or basement, or even your garage, into living space. Depending on the type of renovation, adding to your current home, may be less expensive than purchasing a new, larger one. If you want to buy a bigger house, just make sure your financials are order and you can afford the bigger payments that come with one.

How Do I Know If I Can Afford a Larger Home?

Only you can know answer this question. By looking at your debt-to-income ratio, you may be able to figure out how much more of a mortgage you can comfortably afford. Make sure to add-in extra costs like maintenance and property taxes, as well.

Is Buying a Bigger Home a Better Investment?

Buying a bigger home will usually cost you more in mortgage payments and property taxes than a smaller, fixer-upper home. The question of being a good return on investment depends on various factors including real estate trends at the time you want to sell, where your home is located, and how much equity you can accrue while you live in it.

What Is a McMansion?

A"McMansion" is a colloquial term usually referring to a large, often ostentatious, mass-produced builder's house. McMansions or similarly larger houses decked out with swimming pools, fire pits, and large decks became popular again in the real estate market, during the COVID-19 pandemic hit in the U.S. in March 2020, when people were seeking more space outside and inside.

The Bottom Line

When you decide to move to a larger house or a mid-sized new home with updated amenities on a large property, being prepared for the extra costs and changes to your budget is key to not becoming house poor, overwhelmed by maintenance and upkeep or both. If you take a serious look at what it will cost you, plan and save for a year to test your new budget, you may be ready to move.

If you've planned things right, your future may be filled with more indoor space, better amenities, and an ecologically friendly home surrounded by nature and outdoor features like a pool, deck, and a beautiful fire pit on a patio.

Article Sources
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  1. Realtor magazine. "13 Home Trends Stealing the Spotlight in 2022."

  2. Indeed. "House Cleaner salary."

  3. HomeGuide. "How Much Does It Cost To Own & Maintain A Swimming Pool?"

  4. Indeed. "Yard Worker."

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