This article explains the benefits of upgrading your home in Animal Crossing: New Horizons for Nintendo Switch, including details on what happens with each upgrade.
Animal Crossing New Horizons – All House Upgrades
Expanding your home is one of the most important ways to progress in Animal Crossing: New Horizons, so you should always choose to expand when possible. You can grow your home from a small tent to a three-story dwelling with a few extra rooms, and some useful skills are also locked behind home upgrades. You'll need to earn Nook Miles and Bells to pay off each mortgage, but it's worth it.
In addition to making your home bigger, extending your home also provides the following benefits:
In Animal Crossing: New Horizons, you start out with a small tent instead of a house. Tom Nook will happily accept Nook Miles as payment for the first tent, but upgrades after that require payment in Bells. Each time you are ready for an upgrade, you must talk to Tom Nook and request a loan. Once you have paid off the loan, you can request the next upgrade.
