Bigger or Smaller? How to Figure Out What the Next Home Needs After a Life Change

Start with how you'll use the next home every day for the next several years, not with the square footage. Write down what the change added or took away, then test every house against that list and against what it costs to run, and the answer may be bigger, smaller, or the same size with a better layout.

I'm Dennis Mark Interdonato with The Dennis Mark Group at Keller Williams Realty Ocean Living. Most people don't move because they woke up wanting a new kitchen. They move because life changed: a job, two households becoming one, an estate, a house that no longer fits. Whether the next home is across town or across Monmouth and Ocean County, the trap I watch for is shopping by size instead of by use. Here's how we figure it out together.

Why is square footage the wrong place to start?

Because two homes with the same square footage can live completely differently. A home with a real office, a usable garage and a first-floor bedroom can work better at a smaller size than a bigger home with a formal room nobody uses and storage in all the wrong places.

Layout is also where a builder's eye pays off. I'm a former New Jersey home builder and residential remodeler, so on a tour I'll tell you which walls can move and which ones carry the house. Cutting into a load-bearing wall isn't ordinary maintenance under New Jersey's construction code, so it means permits, engineering and real money. That changes what "we'll open it up later" really costs.

What questions define what the next home needs?

Write the answers down before you tour anything. The list describes the house, not the people in it:

• Work. Do you need a closed-door office, or two? Does the internet service at the address matter for your job?
• Storage. What's coming with you: furniture from a second home, tools, a workshop, seasonal gear?
• Garage and parking. How many cars, and does one of them need to fit inside?
• Outdoor space. A yard to use, a yard to look at, or as little yard as possible?
• Stairs. Is single-level living, or a first-floor bedroom, on the must-have list?
• Upkeep. How many hours a month do you want to spend on the house?
• Location. The commute, the daily drives, and how far you want to be from the water, the train or the Parkway.
• Guests. How often does someone stay over, and where do they sleep?

Then split the list into must-haves and nice-to-haves. When you find the house that hits the must-haves, buy it. You already know what you want.

What does each option cost to run?

The price is only the first number. The Consumer Financial Protection Bureau reminds buyers that when you own a home, "you pay for repairs, along with any property taxes, insurance, and homeowners association dues that apply." Size moves several of those numbers at once:

• Property taxes. In New Jersey, each town sets its own rate, so compare property taxes between towns before you compare houses.
• Heating, cooling and upkeep. More square footage, more roof, more windows and more yard all cost more to keep up.
• Association dues. A smaller home in a community can trade yard work for a monthly fee. Know what it covers.
• Your debt-to-income ratio. The CFPB defines it as "all your monthly debt payments divided by your gross monthly income." Your lender uses it to decide what you can borrow, so run the payment on each option with your lender.

When does bigger make sense?

When the must-have list doesn't fit in the house you have, and a renovation can't fix it at a cost that makes sense. Before you list, get a real price on the renovation, including the permits and the tax side. In New Jersey, a finished addition can bring an added assessment on your property taxes. Here's how added assessments work, and here's the bigger renovate-or-move decision.

If bigger is the answer, the equity in your current home is usually the down payment. Here's how selling one home to buy a bigger one works.

When does smaller make sense?

When you're paying to heat, clean, insure and maintain rooms you don't use, or when the upkeep is taking time you'd rather spend elsewhere. Smaller can mean a single-level home, a smaller lot, a townhouse or a condo, and in Monmouth and Ocean County there's a wide range of each. My downsizing page covers how I run that kind of move, two moves with one plan.

What if two homes are becoming one?

Then the list has to hold two sets of furniture, two sets of routines and possibly two home offices, and you have two houses to decide about. Here's how to decide what to do with two homes when you only need one.

How do we figure it out together?

We start with your list and your numbers, in writing: what your current home is worth, what it costs to sell, and what each kind of next home costs to buy and to run. Start with what your home is worth today. Then I tour with you, reading each house the way a builder does, so the surprises show up before you sign. How I plan around a change like this is on my life events page, and the Life Events Guide lays out the order of operations.

Frequently Asked Questions

Should I buy a bigger house or a smaller one?

Decide by use, not size. List what the next home has to do every day, then compare each option on fit and on what it costs to own each month, including property taxes, insurance, upkeep and any association dues.

How do I know if I've outgrown my house?

When the must-haves on your list don't fit and a renovation can't fix it at a sensible cost. If the layout is the only problem, price the renovation before you list.

Is it cheaper to renovate or buy a bigger home?

It depends on the project and the market. Compare the renovation cost, permits and any added assessment against the cost to sell and buy, with your lender and a builder's estimate in hand.

What costs go up with a bigger home?

Usually property taxes, insurance, heating and cooling, and upkeep, on top of the mortgage. Run the full monthly cost, not only the payment.

This is general information, not legal, tax or lending advice. Your lender decides what you qualify for.

About the author

Dennis Mark Interdonato is a REALTOR® and Master CDRE® who leads The Dennis Mark Group at Keller Williams Realty Ocean Living in Point Pleasant, NJ, helping buyers and sellers throughout New Jersey make their next move, with Monmouth and Ocean County as home base. Read more about Dennis Mark.

Keep reading

• A builder's checklist for a low-maintenance home
• Have you outgrown your home?
• Have a question this didn't answer? Send it to Dennis Mark and it may become the next article.