How do you handle moving up in mortgages? For example where you buy a home, then after a few years (5-7), you sell and move into a larger home with a bigger mortgage. Do you reset your mortgage to a new 15 or 30 year fixed product, or do you just continue with the years left on your current mortgage? Also do you increase the amount borrowed or keep it the same?
I think this question very applicable to people in their 20s. When you are starting out, often you have a lower income, no kids, and little needs. So the house you purchase could be a condo, townhouse, or smaller single family home. Hence after you increase your income and start a family your needs might change.
But should you do this? Or is this expecting too much?
I think that it's a hard to handle saving for retirement, children, and a mortgage in your 20s. Often times, the income isn't matching all your needs. But as you build up your experience and increase your income, you find the ability to comfortably a larger home, children, retirement, etc.
I don't think it's necessarily a bad idea to keep trading in a 30 year mortgage for another 30 year mortgage in your 20s. After all can many people who buy at 22 really afford a single family home? And if you live in an area where you can, was it large enough to fit the family you desire?
Plus if you bought a condo instead, and saved money by buying instead of renting for say 8 years from 22 to 30, perhaps you have significant equity. So is it a bad idea to trade your 22 year mortgage for a new 30 year mortgage to afford the SFH you've been waiting for and saving for by building equity?
This is the new trap of today. Before people like my parents and DH's parents bought one house. They never traded up or moved. But now with jobs in flux, people marrying later or getting divorced, the chances of staying in the same house is small.
So the dynamics of buying one and only one home less the norm, and more the aberration. But does it justify the restarting of a mortgage?
I think it can in some scenarios. Mostly those of people who bought RE in their early 20s. If you wait until your 30s or 40s, I think it makes less sense just because you have less time to finish paying off your mortgage. But in your 20s if you bought something affordable that might not be able to fit your family, then perhaps joining other 30 or 40 somethings in purchasing your final home and restarting your mortgage can make sense.
For us personally, we definitely will have to restart our mortgages. If we had continued on a 30 year fixed, we'd only have 27 years when we bought this current townhouse, and when we buy our next home, 25 years or less. This will be difficult to accomplish, because of prices in our area even if we save up cash for a larger DP and have grown some equity.
But as I write this, I'm also not sure where our incomes will go in the next 10 years so perhaps it's possible. Also we might have the opportunity to move to a lower COLA and that would make our dreams of homeownership a lot more possible. The only thing you can do is make the best decision at the time with regards to your potential income increase, savings, and number of children, etc.