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Q: We are thinking of upgrading our home, in terms of both size and price, simply because the low-interest rates allow us to.

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 Is this a good idea?

A: Additional affordability due to lower interest rates has led many to believe that now is the time to upgrade, especially if they have owned their current home for a few years and built up a healthy amount of equity.

However, there are a few things you need to check first. One of the most important is what sort of deal you can get on a new home loan. You may qualify for a much bigger bond now, or a lower interest rate than when you bought your current home, especially if your earnings have increased and you have a strong credit record.

Still, be realistic about how much more you can really afford to pay for your home each month, especially if your family has grown since your last home purchase and you now have additional monthly expenses, such as school fees and higher food, transport, insurance and medical bills.

Remember, just because a bank agrees to lend you a certain amount, you don’t have to spend that much or stretch your monthly budget to the limit.

You also need to factor in your other debt repayments and expenses, as well as long and short-term savings goals, like university for the children and your own retirement, and then still leave yourself some leeway to cope with emergencies.  – Berry Everitt, chief executive of the Chas Everitt International property group.

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