Expert: Lisa Webber - 2/8/2012

Question
Hello-
I just had a question about the costs of upgrading to a new house when you outgrow your current one.  We have been in our house just about a year, but feel it may be too small soon (more kids coming) and we may need to get a bigger one is a few years.  We bought it for $200,000 and put $40,000 down.  I am just wondering about estimated cost if we were to get a new house after such a short time.  Say we found another house for about the same price or slightly higher.  Would the estimated realtor fees of, say $10,000 (5% of the purchase price) and the estimated $4000 closing costs on the new house have to be paid out of pocket, or would they be part of the new loan that we get?  Does having more equity in the house make  the costs of getting a new home lower?  We don’t have a lot of money so just trying to figure out how expensive it will be.  Thanks for your help!

Answer
I don't know where you are located so your costs are going to be dependent upon where you live.  You'll have your real estate costs as well as transfer charges to pay when you sell your current home.  What I suggest is that you discuss your plans with a good Realtor in your area who will give you an estimate of your closing costs and what you may be able to sell your home for. They won't know what you'll be able to sell it for in 4 years unfortunately because no one knows where the market is headed and all markets are local.  The equity that you have when you sell your home can be used for your downpayment on your new home to lower your mortgage cost.  Most Realtors would love to consult with you and go over different scenarios so they can give you an idea of what your costs will be so you can plan and the Realtor can help you sell the house you're in and buy the new house so they can help with all the details.  Good luck!