— We take our content seriously. This article was written by a real person at BREL.
Picture it:
You bought a starter house in Toronto 5 years ago for $600K. Thanks to a healthy real estate market with increasing prices, your home is now worth a Million dollars, and you’ve tripled your equity. Woohoo: you’re a millionaire!
But more often than not, we hear WTF: I’m stuck!
Because while the price of your home was going up, your life changed too…and with it, your housing needs. Whether you had a new baby, got married or took a new job with a new commute, your existing house just isn’t what you need anymore.
The problem? The upgrade you want to make – to a bigger house or a better house or a more walkable neighbourhood with top schools – is hard to make if your income hasn’t kept pace with the real estate market. You’ll likely be disappointed by what an extra $100,000 or even $200,000 in house will look like. Add to that the costs of buying and selling (land transfer taxes, real estate commissions, legal fees and moving) and it can be tough to upgrade if you haven’t won the lottery or come into an inheritance.
So what should you do if you’re trapped in your Million Dollar house?
Step 1: Get The Facts
Talk to your bank or mortgage broker
The increased equity in your current home, along with lower interest rates, changing financing rules and the increases in income since you last purchased, might mean you can make a bigger move up than you think.
Talk to a REALTOR
Find out what your existing home is worth and educate yourself about the current market conditions.
Step 2: Do Some Soul-Searching
Define what’s important to you in an upgrade. Don’t just make a dream list of all the things you want – what do you really need? What are you prepared to compromise? You’ll want to look at:
- Size
- Types of rooms/parking/basement
- Outdoor space
- Features and finishes
- Neighbourhood: amenities, walkability, nearby schools, liveability
The bad news: If you need to move from a 2-bed house to a 4-bed house to accommodate the new twins and your budget isn’t much higher than what you’ll be selling your house for, you’ll probably have to give up something you already have. Is four bedrooms more important than the private parking you enjoy right now? How do you feel about moving to a lesser neighbourhood if it means you can have the backyard of your dreams or a finished basement with a nanny suite? Would you trade your short commute for a gourmet kitchen and open concept entertaining space?
Step 3: Review Your Options
So your housing needs have changed. You have a restrictive upgrade budget, especially after you factor in the costs of moving. What are your options?
Option 1 – Sell Your Current Home and Upgrade To a New One
The obvious option. Once you’ve figured out how much your existing home is worth and what you can afford and made a list of your needs and possible compromises, it’s time to find out: does what you want exist in your budget range? Or are you searching for a unicorn? Research sold prices and talk to your REALTOR who should be able to provide some options you haven’t even thought of.
Option 2: Renovate Your Current Home
Is there anything you can do to your current home to make it more closely match your current needs? Consider:
- An addition or top-up (if your lot allows it) – getting permits for additions and top-ups is far from guaranteed in Toronto, but if your main issue is space, this option might be more affordable than moving. It won’t be cheap – so make sure renovating solves your space issues for the next 5-10 years, so you don’t find yourself spending $100K or more in renos, only to be in this same position next year.
- Finishing the basement – if your current basement is unfinished, can you finish it? Underpinning is a big job (and prohibitively expensive for most people) – but even partly finishing a low basement might make it into a useable rec room for the kids.
- Reconfiguring how you use the rooms in your current house – Do you really need a guest bedroom if it only gets used a few times a year? It might be cheaper to put your guests up in a hotel and convert that space into what you need, whether that’s a home office, separate kids bedrooms or a crafts room.
- Renovating your current home – Fancier finishes, a second bathroom, new appliances – you might be able to invest in your existing home and feel like you’re living in a brand new one.
- Redecorating or landscaping – If your urge to move is motivated by a need for change, investing in some new paint, new floors, landscaping or new furniture and accessories might be enough to calm that voice inside your head. Check out our staging blog here for design ideas.
What can’t you change?
- Parking
- Your location
- Your neighbours
Option 3: Stretch your geographic boundaries – and consider the ‘burbs.
One of the best ways to get more house without spending too much extra money is to change neighbourhoods – and yes, that includes considering a move to the ‘burbs. The further you move from downtown Toronto, the better value you’ll see. Plenty of our clients have cashed in on their Toronto house and now live mortgage-free outside of the city.
Related: Should You Move to The ‘Burbs
Option 4: Rent out your home and rent somewhere that more closely suits your needs.
Caveat: this strategy is not without risk and only works if the market continues to increase in value.
If your restricted budget co-exists with real, non-negotiable needs for a significant space upgrade, you could always consider renting out your current home and becoming a tenant in a house that works for you. This option allows you to continue to own property in Toronto (and hopefully benefit from appreciation in prices) while getting a space that more closely matches what you need. The rent/rent option may buy you the years of price appreciation and salary increases you need to make the move-up.
Are you feeling trapped in your million dollar house? You’re not alone – and you do have options. We can help.
