Decide to Move or Stay Put? Calculate your 10-year financial impact.

When deciding to move, you can expect financial changes, whether upsizing or downsizing. Follow along with this example using the ‘Deciding to Move or Stay Put Calculator’ to calculate the up-front and long-term financial impacts of moving.

Introduction

Deciding whether to stay in your current home or move to a new one is a crucial decision that can impact your budget, lifestyle, and overall economic well-being. There are several financial aspects to consider, and making an informed choice requires a deep dive into these considerations.

Before deciding to move, you must assess your current financial situation, research your options, compare the costs and budget changes, and then decide. This article provides valuable insights to help you make an informed choice.

In this article, I will use the Stay or Move Calculator to follow a scenario where I sell a condo property for $750k and buy a house for $1M. Here is the summary of this scenario.

1. Staying Put: Assessing Your Current Home Financial Situation

Review Your Current Home Equity and Mortgage

Start by assessing the current state of your home equity, which is your expected sales price minus your mortgage balance.

Estimating your current home’s market value can be done through real estate agents, bank appraisals, or by researching other recent and comparable sold listings. Tools like www.zillow.com (US) or www.housesigma.com (Canada) are great research tools.

Your current home’s annual property value growth rate needs to be estimated as it impacts your long-term equity growth. Estimating the annual growth in your country is usually too broad. Try to find historical data showing the annualized growth rate over the past 10-20 years at the regional or city level. Then, use that figure to estimate the growth rate over the next 10 years.

For your mortgage rate, you can enter your current rate or the average mortgage rate you expect over the next 10 years.

My entries for these figures are below.

Understand Your Current Annual Housing Expenses

Calculate your current monthly and annual housing costs, such as property taxes, utilities, management expenses, any basic maintenance and repairs, home insurance, and anything else you can think of that is recurring. Understanding these expenses is crucial for comparing them to the potential housing costs of your target home.

Major Repairs and Renovations

Are there any major repairs you will take on if you stay put, such as the furnace, roof, or air conditioning? If so, capture those expenses here.

Renovating your current home is sometimes a more cost-efficient option than moving. Can you add to the square footage of your home by adding an extension or another floor? Or can your internal space be used better by finishing the basement or attic or shifting around the walls? Sometimes, it’s just a case of improving on outdated finishes, such as updating the bathrooms or kitchens.

If major repairs or renovation are something you intend to do if you choose to stay, capture an estimate of those one-time costs. In this example, I expect to renovate the kitchen if I stay, so I’ve included those costs.

Real Estate Agent Fees and Commissions if You Sell

You’ll likely incur real estate agent fees and commissions if you sell your current home, which will only happen if you choose to move. These commissions usually range from 3%-6% of your sale price.

With my sale price of $750k, the expected expense of a 4% commission will be $30k. When you receive your sale proceeds, the $30k is paid out to the realtor, meaning I will be left with $720k to use towards my old mortgage and new home purchase.

2. Moving: Research Your Future Home Options

Estimate the Purchase Price of Your Future Home

Knowing the market value of the target properties you want to buy is crucial for making informed financial decisions about buying and selling your existing home. It helps minimize surprises when you bid for a new home or sell your current one.

As noted earlier, tools such as www.zillow.com (US) or www.housesigma.com (Canada) help you see ‘sold’ properties, which is more accurate than only looking at ‘listed’ values. Identify professionals or tools in your current market that can help you learn this information.

Do you expect to add more funds to your down payment or pay mortgage insurance? If so, please include those figures.

Returning to this scenario, I will capture the $1M purchase price. Because of my high down payment amount, I won’t need any mortgage insurance.

Mortgage Rate Considerations

Your credit score is crucial in determining your mortgage eligibility. A higher credit score can lead to better financial opportunities based on securing a lower interest rate.

The state of the housing market and mortgage rates can significantly affect your decision. Explore fixed-rate mortgage options for stability and to avoid surprises. If you can withstand mortgage rate increases and payments, then variable may also be an option.

This calculator will use a single rate to perform the 10-year estimate, so enter your best estimate based on your research or advice from your financial planner or mortgage broker.

3. Moving: Understand Your Transaction Costs

Legal and Regulatory Fees

When purchasing a new home, you must account for closing costs. These expenses can include appraisal fees, title insurance, and legal fees. Some are government-mandated, while others are optional but will protect you in case of an issue with the sale. Consult a lawyer or the local government guidelines for more information on these fees.

Moving and Relocation Expenses

The logistics of moving involve various expenses, such as hiring movers, packing materials, and transportation costs. These can add up quickly if you are outsourcing all this work. Consider what you can do yourself, such as disassembling large items and packing. This can reduce the total hours the moving company will bill you for time spent on these tasks.

Home Inspection

Given that a home purchase is usually the largest transaction in most people’s lives, paying for a home inspection is a great idea to avoid future negative surprises and major expenses.

It will provide a comprehensive understanding of the property’s condition, helping you make informed decisions about potential future costs, including structural problems, electrical and plumbing issues, and environmental concerns like mold or asbestos, and that essential systems like heating and cooling are functioning properly.

Land or Property Transfer Taxes

Land transfer taxes, sometimes referred to as property transfer taxes or stamp duties, are fees imposed by various levels of government when real estate ownership changes hands. The property buyer typically pays these taxes, which are a significant part of the costs associated with moving. Check your local government regulations to ensure you have accounted for this purchasing expense.

Based on my local government guidelines and research on some local expenses, I used the below figures.

4. Moving: Repairs, Renovations and Recurring  Costs

One-time Repairs, Renovations, and Upgrades

To prepare your current house for sale or to make your new home comfortable, you may need to invest in repairs or upgrades. This could be repairs and maintenance to keep your new home in good standing and operating normally. Alternatively, it can be upgrades and improvements that will improve your living conditions for years to come.

Both options should be factored into your decision and captured in the calculator.

Future Annual Expense Estimates

While upsizing usually leads to higher monthly and annual expenses, downsizing can lead to potential savings around utility bills, property taxes, insurance, and basic maintenance and repairs.

It is difficult to know what your new expenses will look like for a move. One method is to estimate that based on your change in home size, such as square footage. For example, if you are moving from a 2000 sq ft home to a 2500 sq ft home, you can estimate that your expenses will increase by about 25% (500 / 2000).

Future Resale Value

Even if you’re not planning to move immediately, this will influence your 10-year financial outlook. If the type of home and area you are in appreciates faster than your existing home, that will help build your wealth faster, which can factor into your moving decision.

I’m moving to a bigger home in this scenario, so I expect the expenses to increase.

5. Reviewing Your Decision to Stay or Move?

In conclusion, deciding to stay in your current house or move elsewhere is complex and has financial implications. We’ve covered many considerations, from financial health to staying and moving costs.

Financial Decision Support – Your 10-Year Equity Position

At the start of the article, I noted that for this scenario, I will have $61k less equity if I move versus stay in my current home. Below is the breakdown of how the calculator helps you understand that equity number. It is calculated based on all the inputs shown on the Detailed Results of the Move or Stay financial calculator.

There are 3 areas to pay attention to as you dive in

1. Your Starting Equity position before you make any decision.
2. The Expenses over 10 years that take away from your equity.
3. The Equity Growth that adds value to your equity.

So, in the end, your 10-year net equity = starting equity, less your expenses, plus your equity growth. Comparing your net equity position across Option 1 ($365,140) and Option 2 ($303,699) can guide the financial part of your decision.

Non-Financial Reasons to Move

A move decision also has a variety of non-financial factors that you need to evaluate. This includes your job stability, travel distance to work, remote work options, access to child care, immediate family needs, extended family support structure, nearby friends, quality of schools, neighbourhood safety, amenities, and more.

These factors will have a weighting or priority level depending on your life stage and how soon you see yourself moving to another stage. These life stages and the related needs include being single, married, raising young kids, living with independent kids, empty nesters, and more.

6. Conclusion

Moving is a major decision in life and has long-term financial and emotional impacts for years to come. Taking the time to review both the financial and non-financial reasons to move will help provide a more holistic view for your decision.

This calculator provides directional guidance and helps you take all impacts into account. Remember to seek professional advice from trusted financial advisors, real estate agents, and accountants to ensure your decision aligns with your financial goals and aspirations.

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