Purchasing a New Home (Upgrading)
Here you will find the steps for purchasing a brand new home or upgrading to a more expensive home. If your scenario includes selling a home first, please click here for details on how to do that in Snap.
In this article:
In this example, Mary Snapper plans to purchase a new more expensive home in the year she turns 66 and starts another mortgage as well. We have already entered the first home sale in the projections and paid off the first mortgage with the proceeds of the sale. Automatic cash-flow management is turned on in this scenario.
- 1
-
Determine the future price of the new home.
How much will the client expect to pay for a more expensive house in the year she turns 66? Perhaps 150% of their first home's value?
At the end of the previous year, the original house was valued at $631,777. A new home worth 150% of this amount is $947,665. To keep it simple, we will enter a new home with a purchase price of $950,000.
NOTE: For scenarios with a jointly owned Real Asset, use the Combined page to determine the future value of the home when it is sold.
- 2
-
Enter a new Real Asset with a Future Purchase Age
Go to Scenario Setup -> Assets.
Enter a new Real Asset with a Future Purchase Age equal to the Future Sale Age of the original property. Enter the amount of the new Real Asset in the Cost column. This is the nominal dollar value for the new home, the value of the home in future dollars. The Value column will be uneditable and display a $0 value. This is because the new home has not yet been purchased and its current value for Mary is $0.
NOTE: If you prefer to enter a date rather than an age, click the gear icon to the right of the cell.
By default, the Real Asset sale happens on January 1st of the year the client turns the age entered in Future Sale Age. The purchase of the Real Asset happens on December 31st of the year the client turns the age entered in Future Purchase Age.
- 3
-
Review the Planning Pages
Go back to the Planning page and run the scenario, if prompted. In this scenario, Snap has made withdrawals from Mary's Financial Assets to support this purchase.
The mortgage was also paid off with the proceeds of the home sale because the mortgage was linked to the house on the Debts page. A new mortgage can be started in order to prevent large withdrawals from Mary's accounts if desired.
- 4
-
Start a new mortgage (optional)
Add a new mortgage with a Future Start Age matching the Future Purchase Age of the new home.
Go to Scenario Setup -> Debts and then enter a new debt with a Future Start Age.
As shown here, the downpayment is coming from the non-registered account.
You also have the option to change where the funds for the down payment will come from. Please click here for details on how to override the automatic withdrawals from the accounts and enter manual withdrawals.