Are you a homeowner who is dissatisfied with your current home? Are you looking to buy a new place, but are tied up with the mortgage of your current one? If so, learning more about a move-up home, and how you can finance one, could help you find the home of your dreams.

The Concept of a Move-Up Home

When a homeowner wants to sell their existing house and move into one that is bigger, or newer, or in a better area, the prospective property is often called a ‘move-up’ home. Common reasons for purchasing a move-up home include better financial prospects, the need for more space, or relocation due to a new job. The phrase makes sense when you consider the well-known idea of ‘moving up in the world.’

A Move-Up Buyer

From the concept of a move-up home comes the idea of a move-up buyer, someone who already pays a mortgage on a current home, but is eager to buy and move into a new one. It should be noted that a move-up buyer is not interested in a bigger or better home for investment, but for living, as the new home usually has features that are preferred to those of their current one.

Related Industry Terms

There are other terms in the home financing industry which describe other options for home purchase. For example, a first-time buyer is a person who has never had a mortgage. These are often younger people who have just finished their education, or who have been living with their parents in their family home. Because of this, they are new to the reality of getting a mortgage.

As well as this, you have homeowners who wish to downgrade in some way. This is the opposite of a move-up buyer. The move-up buyer is usually looking for somewhere bigger, or upgrading in some manner. Move-up buyers are at a place in their life where they are financially secure enough to want to buy a home that may have a larger mortgage than their current one. Conversely, homeowners who are downsizing will often look for a home that is smaller and usually has a cheaper mortgage. A good example of downsizing is when a married couple who had children are now retired, and their children are all adults with their own home. Because of this, the home that originally housed the entire family is too big, and may require too much maintenance for the couple who are now older and would like somewhere that is more suitable for their adapted needs.

Challenges For Move-Up Buyers

There are two main challenges for move-up buyers, and they are both tied to financing a home. The first challenge is securing a down-payment for the move-up home when a mortgage and other bills take up a majority of available money. This might not be a challenge if you’re an avid saver, but a down-payment can be up to twenty percent of a move-up home’s value, which can be a significant amount if it’s a more expensive place.This can make buying a move-up home difficult for even the most frugal homeowners.

The second challenge for move-up buyers is simply qualifying for the mortgage of a move-up home while already committed to a mortgage on another property. This depends largely on how much of the buyer’s current income is needed to pay their current mortgage.While neither of these challenges are applicable if the buyer can live elsewhere while looking for their move-up home,most move-up buyers want to live in their current home until they can secure financing for their new one

Move-Up Home Financing Options

Despite the challenges for move-up buyers, there are a range of financing options available for people who wish to buy a better place. Moving up can be very advantageous for a buyer, as it can improve their overall quality of life. Common reasons for purchasing a move-up home include better financial prospects, the need for more space, or relocation due to a new job. Here some that can help counteract the challenges for move-up buyers:

FHA Loans

FHA loans are loans that are subsidized by the Federal Housing Administration. This is essentially a mortgage borrowed from a federally-qualified lender. As of 2017, someone applying for an FHA loan can borrow up to 96.5% of the home’s value, which can make handling a down payment is more manageable.

Jumbo Loans

Jumbo mortgages, also known as ‘non-conforming mortgages’, allow move-up buyers to finance luxury properties as well as properties in expensive areas like the Washington, DC metropolitan area.

Bridge Loans
Bridge loans are also sometimes known as ‘swing loans’ or ‘interim financing’. These temporary, short-term loans are designed to help with cash flow while securing a mortgage on a move-up home. They help homeowners by bridging the complex transitional period between buying a new home while still paying for an old one.