{"id":1300,"date":"2015-09-03T05:22:28","date_gmt":"2015-09-03T05:22:28","guid":{"rendered":"http:\/\/www.prosolution.com.au\/?p=1300"},"modified":"2018-03-08T17:17:22","modified_gmt":"2018-03-08T07:17:22","slug":"is-it-time-to-upgrade-your-home-our-new-calculator-might-shed-some-light","status":"publish","type":"post","link":"https:\/\/wealthcoach.com.au\/stage\/is-it-time-to-upgrade-your-home-our-new-calculator-might-shed-some-light\/","title":{"rendered":"Is it time to upgrade your home? Our new calculator might shed some light."},"content":{"rendered":"

Click here<\/a> to download a printable version.<\/p>\n

Your home can end up being one of the best investments you make. Firstly, it\u2019s probably the only tax-free investment opportunity you will ever get (i.e. nil CGT). Secondly, if you buy good quality property (home) and it appreciates in value, you can use the equity in your home to borrow money and invest it to build your asset base.<\/p>\n

Over the past few months we have noticed more of our clients have been considering upgrading their home. Until now, this \u201cupgrading activity\u201d has been relatively subdued since the GFC (i.e. compared to before the GFC) \u2013 but it seems to be back in people\u2019s minds again. There are a number of financial planning issues to consider when contemplating an upgrade which I discuss below.<\/p>\n

Some good reasons to consider upgrading your home<\/em><\/strong><\/p>\n

There are a number of lifestyle reasons that people may consider upgrading their home including wanting larger accommodation (particularly if you have a growing family), moving closer to schools or other amenities, moving closer (or maybe further away?) to family and so on. These are lifestyle issues and how important they are will be different for everyone. However, for most people it will be important to balance out both lifestyle and financial considerations \u2013 as it\u2019s probably not prudent to focus solely on one or the other. I just want to point out however, that this article is admittedly, unbalanced. That is, I will focus only on financial considerations and I\u2019ll leave the lifestyle bit for you to ponder over separately.<\/p>\n

The best financial reason for upgrading your home is to move to a property that has superior capital growth prospects. Whilst your home isn\u2019t necessarily purchased with the goal of building your wealth, accumulating equity can certainly help a lot. Firstly, assuming your financial situation allows it, you can borrow against that equity to invest. Secondly, if you plan to move or upgrade in the future, then the more equity you have means the less you have to borrow. Therefore, having a home that has the propensity to increase in value at an average rate at or above 7% p.a. is very advantageous (which is equivalent to it doubling in value every 10 years).<\/p>\n

When considering an upgrade have a look at your existing home\u2019s past capital growth rate. That is, how much has it appreciated in value since you have owned it? You can use this simple Excel template calculator<\/a> to work out the average compounding growth rate of your home. Remember, you are aiming for a rate of above 7% p.a.<\/p>\n

When is the right time financially?<\/em><\/strong><\/p>\n

Typically, upgrading your home results in a larger home loan which forces people to consider the question; is now the right time to take on a higher mortgage? Is it financially safe to do so?<\/p>\n

There are a few things to think about:<\/p>\n