Buying your next home is really exciting, there are a few tips and tricks to be aware of.
Thinking of buying your next home, this next step is really exciting. There are many parts of this process that are the same as the first home buyers process which is awesome, but there are some parts that are different. Read on to see about how the process is different when buying your next home and how we can help.
Let us start here: What do I do with my current home?
When you start thinking about buying your next home the first thing you want to think about is what to do with your current home. You have three options:
– Sell your current home before you buy your second.
– Buy your second home before you sell your current home.
– Keep your current home as an investment.
Now each of these has its benefits:
- If you decide to buy your second home, before selling your current home. You may need to get bridging finance (more about this below), or you can have a clause in the contract to buy your second home that states that you cannot complete the transaction until you have sold your current home. Technically this would be, being under contract on your next home, with the condition that you are going to sell your current home before satisfying all the conditions on your next home contract – this seems really confusing, but it’s actually really common. It can create a bit of a pressure situation when selling your current home, however, in a ‘hot’ market this is a very popular way of buying and selling.
If you decide to sell your home before purchasing another one, you have ‘cash’ to buy your second home – making you are a more attractive prospect for the seller you are buying from. However, this option can put you under pressure to have a place to move to when the settlement date comes for your current home. There are conditions that can be written into any purchasing or selling contract to help you make this as achievable as possible.
- Keeping your home as an investment property relies on you having savings to pay a deposit or having equity in your current home. To know more about this follow this link to our Investment Property blog post.
Are there any ‘hidden’ costs with purchasing the next home?
Costs around a next home and usually the same as the first home, lawyers fees are a staple when buying any home, so always make sure you account for that. Also, Real Estate agents take a commission from the sale of your current home. Please make sure that you discuss this with your real estate agent and have an understanding of how much money you will take away upon the sale of your home.
Bridging Finance:
Bridging Finance is essentially when you have two home loans at the same time. It’s a short term loan that allows you to buy your second property, unconditionally (unless there are other conditions). You will have to pay off both loans at the same time and the bridging finance will often be at a higher interest rate. Therefore if you head down this path – the longer it takes you to sell your current home the more you will pay.
Once you have made a choice from the above options regarding how you will deal with your current home, the road to buying your next home can be different. This is where having a Mortgage Advisor that understands your personal situation is such a lifesaver. A Mortgage Advisor will guide you through the process of gaining pre-approval and how to best structure your new home loan to make it work for you and help you achieve your future financial goals.
While we’re home loan experts, our blog posts are for general information purposes only and are not intended as financial advice. If at any stage you need personalised advice, get in touch on 06 8788 4444 or Ben or Mark.
