This article explains the benefits of upgrading your house in Animal Crossing: New Horizons for Nintendo Switch, including details on what happens at each upgrade step.
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Animal Crossing New Horizons – All House Upgrades
Expanding your house is one of the most important ways to progress in Animal Crossing: New Horizons, so you should always choose to expand whenever possible. You can grow your house from a small tent to a three-story house with a number of extra rooms, and some useful abilities are also locked behind house upgrades. You'll have to earn Nook Miles and Bells to pay off each mortgage, but it's well worth the effort.
In addition to simply making your house bigger, an extension to your house also provides these benefits:
In Animal Crossing: New Horizons, you start with a small tent instead of a house. Tom Nook is happy to take Nook Miles as payment for the first tent, but upgrades after that point require payment in Bells. Every time you're ready for an upgrade, you'll need to talk to Tom Nook and request a loan. When you pay off the loan, you can request the next upgrade.
