When you’ve found “the home” for the second or third 😊 time, knowing whether to buy or sell first (or even keep your existing property) can be a tricky decision.
Unlike the first time you purchased, you already have a home loan.
When buying your next home there are a few options available to you:
Buying before selling can offer some advantages. If the market is steady or rising, you could save on your next home by locking in today’s prices, while letting the value of your existing home appreciate. Also, if you see a place that you can’t live without, buying before selling your home means you won’t miss out to other buyers.
However, there is no guarantee your current house will be sold. If there are no buyers or your property is passed in at auction, you’ll need to juggle not only one, but two home loans until you do sell. If you have the funds behind you and a good guaranteed income, this may not be a concern, but for some homeowners, this arrangement can cause a major financial strain.
With that pressure, you may feel rushed to sell your current home, and accept a price below your expectations.
There are ways to minimise the chances of this happening. For example:
If you’re not in a rush, you can wait until your home is sold before making an offer on your next home. This option will avoid any of the pressures that may have experienced with option 1.
With money in the bank from the sale proceeds of your current home, you’ll also have a firm idea of how much cash can be spent on your new home – and how much you’ll need to borrow.
If you want to earn additional income while searching for your next home, you can invest your sale proceeds in a high-interest savings account!
If you plan on taking this approach, be sure to consider where you will live while you find a new home. Whether you stay with friends or family, Airbnb or rent for a while, you will need to take into account the cost and inconvenience of moving twice. Budgeting these details in advance means you’ll know exactly how long you can wait for that perfect home to come along.
You can sometimes be lucky enough to find the right home and a committed buyer at the same time. We would recommend a review your current loan and refresh if need be to take advantage of the home loan offers and interest rates available at the time.
Alternatively, you could transfer your existing home loan to your new home – known as substitution of security (or loan portability). However, in this case, there are a few issues you need to consider:
You might have decided to permanently rent out your current home, making it an investment property. In this case you have now created another income which can be very beneficial but it also has some things you need to consider:
So when you decide that it’s time to move, please call us for an independent review. We will help you to evaluate your circumstances and help you decide the best option to help you move forward.
Purchasing a property is a major financial step and buying before selling your home is not without its risks.
By taking the time to properly consider all of your options and speaking to us first, buying your next home can be an exciting and financially stress-free experience (as it should be).
If you would like to get some advice specific to your circumstances, please feel free to call us on 8004 2222 or book in a time to chat with George.
PS This article is prepared based on general information. It does not take into account individual financial or property objectives or needs and is not financial product or investment advice.