Homebuyers' Walkthrough: When to Sell and Buy a Move-Up Home

Even after you find the perfect home, it might not necessarily be your forever home. At some point, you may decide to buy a different one. Reasons might include:

• An additional income-earner has joined the household.
• Your family is growing, and you need more space.
• The kids have moved away and it's time for a smaller house.
• You or your partner received a promotion that comes with a better salary and benefits package.
• Your current home's value has significantly increased, and you want to capture those gains.

Current and Future Needs

Many first-time homebuyers are not in a financial position to making buying decisions based on future needs. A young couple, for example, may want to eventually start a family, but the home they can afford now would be too small for kids. When homeowners are in the financial position to move up – or out of a starter home - they may be able to take both current and futures needs into consideration.

It’s important to remember that just because you can afford to buy in a certain price range does not mean that you have to – less expensive homes can still be on your radar. That mortgage payment will probably be with you for 30 years. Make sure that higher-priced home is worth more to you than having an extra $200 or $300 a month (or more!) for the next three decades. (For thoughts on this process, see How to Manage Lifestyle Inflation.)

Financing a Move-Up Home

You’ll have to consider financing options when buying a move-up home. If your existing home hasn’t sold yet, you can choose a home-equity loan or bridge loan to make the down payment on the new home. (See also Should You Pay All Cash for Your Next Home?)

A home-equity loan lets you borrow against the equity you have in your current home. The loan is based on the difference between the home's current market value and the amount that remains on your mortgage. Home-equity loans are usually less expensive than other loans. (For more, see: Home-Equity Loans: What You Need to Know.)

A bridge loan is a short-term loan that is used until the homeowner secures permanent financing. These loans "bridge the gap" between financing sources, such as while you wait for your existing home to sell. Since these loans are short-term, they tend to have relatively high interest rates – so they are used only for the short-term.