# Buy a big house and hope for rising house prices or pay down my current house?



## Underworld (Aug 26, 2009)

A subjective question: What are peoples opinions on buying a larger primary residence and hoping for rising house prices vs paying down all debt on your current primary residence?

Thanks!


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## Just a Guy (Mar 27, 2012)

Depends on if you believe we're in a housing bubble, normal market, or rising market. 

Personally, I'd pay down your mortgage. 

There was an interesting look at a similar issue here...

http://www.easysafemoney.com/warning-signs-revisited/


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## Pluto (Sep 12, 2013)

Underworld said:


> A subjective question: What are peoples opinions on buying a larger primary residence and hoping for rising house prices vs paying down all debt on your current primary residence?
> 
> Thanks!


If you are happy with your house, stay where you are and pay down the mortgage. If it is a lifestyle thing, where perhaps, a partner wants a bigger house, that isn't a purely financial situation, and so a financial answer can not address the whole question. If you are thinking purely financial, and you are seeking capital gains, I think you will have to wait many years for significant price increases. There is plenty of time to get a bigger place for capital growth purposes. The only possible financial justification for a bigger place I can think of is if a new place has a rentable suit, and the rental income can cover your expenses.


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## liquidfinance (Jan 28, 2011)

Personally I would prefer to pay down the mortgage. Our current house doesn't fit our needs so it will be a case of upgrade but try and save in order to keep the mortgage payments the same rather than taking on a bigger mortgage.


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## Underworld (Aug 26, 2009)

We bought our first house as a nice quality, 2000 square footer which will meet all of our family size requirements. Thinking about it, I think I would be more psychologically motivated by seeing progress being made towards paying down our mortgage.
There's nothing I really want in a bigger house to be honest. They look like the same as what I have with a few more square feet in each room.
I think I'll just pay down what we have


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## Latito (Nov 18, 2013)

Keep in mind that with a more larger (more expensive) house you will be paying more property tax, more interest on the mortgage and repairs will likely be more expensive to maintain the quality of the home. Given all of these sunk costs it likely isn't worth it unless significant appreciation happens. Personally I wouldn't bet on such a thing happening in the near term.


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## rikk (May 28, 2012)

Underworld said:


> A subjective question: What are peoples opinions on buying a larger primary residence and hoping for rising house prices vs paying down all debt on your current primary residence?
> Thanks!


I went with option 3 which many are still doing I see by looking around, I liked my location so I had the house made larger. Would I still do that today? Sure ...


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## leblanc (Mar 19, 2014)

It depends where you live and what the percentage of appreciation is per year. My tip of advice as a mortgage broker is: Maximize your prepayment options and reduce the total amount of interest your paying on your mortgage. but also invest into a new property as it will help you build net worth quickly, especially since someone else will be paying your mortgage.


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## Cal (Jun 17, 2009)

If you are happy with your current house and a disciplined investor, financially you will come out ahead staying put and investing the extra mortgage money you didn't use by getting a bigger home.


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## Rusty O'Toole (Feb 1, 2012)

If you need or want a larger house, and can afford it, you will end up OK because interest rates are so low. If you are looking at it purely as an investment you can do better.


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## marina628 (Dec 14, 2010)

Twenty+ years ago somebody told us to buy the biggest home you can afford because prices were going up.They were right but we bought a small semi as we never had any debt before and was not sure of the extras that come with a house.We have moved to a new bigger house in 2001 and again in 2010 and the reason for it was was because in 1992 the house we bought was not a dream house but just a place to live.In 2001 we bought a bungalow but we knew it was not 'perfect ' but we wanted to buy something we knew we could add value to and we did make money on it.Our current home is 3900 sq ft plus the basement is additional 1300 sq ft and we never think of money with this house as we love the surroundings and the house.We always wanted lots of land around us and a home that would suit extended family if my parents ever moved in and we have it.Big homes and land come with big tax bills and big utilities so you would really have to make $xxx,xxx in profit over a 10 year period to offset all these extra costs.


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## Addy (Mar 12, 2010)

We also bought a first home that was well under what we could afford, and it paid off in leaps and bounds. Now, in our current home we bought a larger home than we needed simply to rent out a room or two as we like to have room mates.


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## gardner (Feb 13, 2014)

Banks and RE agents are always keen to get you into as expensive a house as they can. The more you pay, the more RE commissions are and the larger the loan the bank writes up. I would not accept "advice" from these sources at face value.


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## agentPawel (Mar 19, 2014)

This is a great question, but it largely depends on a few factors. What is the interest rate on your mortgage? When is it up for renewal? Where do you live?

I noticed quite a few comments from people advising you to pay down your mortgage, but with 2.84% five year fixed, or 2.35% five year variable, I think it's irresponsible to pay down your mortgage when that money can be invested on the stock market. There are great blue chip stocks paying a higher dividend than your interest rate.

The advantage of purchasing a more expensive house is the additional leverage you have from the added debt.

ie.

$500,000 at 10% = $50,000
$1,000,000 at 10% = $100,000

Depending on your financial situation, you may be comfortable with the added mortgage, but it seem's you've overlooked another great option, namely a second income property.

I would suggest a second property that generates positive cash flow using a HELOC (Home equity line of credit) on your existing property for a downpayment (assuming you have enough equity). Doing this makes your interest tax deductible. That way you have more money in your pocket and you achieve the same result without having to double your mortgage payments. 

2 x $500,000 at 10% = $100,000
$1,000,000 at 10% = $100,000


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