Upgrader buyers guide
Making the decision to upgrade your home is no mean feat. While many upgraders have been through the home-buying process before, purchasing your next home brings a new raft of challenges including deciding whether to sell your previous home, budgeting for a bigger mortgage, accommodating specific lifestyle changes and potentially moving to a new suburb or state.
Why you might consider upgrading your home:
01
A larger home is needed to accommodate lifestyle changes like children, pets, ageing family members etc.
02
A desire to improve your home’s features. For example, a larger backyard, pool, more storage space, a bigger kitchen.
03
Strategic financial growth might be important to you.
04
Your current home is not your dream/forever home.
Budgeting and finances
When it comes to budgeting for your next home it’s best to reach out to your Flint broker as early as possible. Having these conversations early on can help you understand your borrowing potential, whether increased repayments are feasible for you right now, and if you need to sell your current home or can hang onto it as an investment.
Much like purchasing your first home, a 20 percent deposit is usually required to avoid Lenders Mortgage Insurance (LMI). However, a Flint broker will help you understand whether this is applicable to you or if you are able to purchase with less of a deposit. Also, depending on how much you have paid off your current loan, and how much it has grown in value, you may be able to use equity to purchase your next home.
Should you sell or buy first?
One of the most challenging decisions upgraders face is whether they should sell first or buy first. The timing of these transactions are tricky and there are a lot of factors to consider.
If you sell first, your finances will be freed up to purchase a home when you are ready. You also won’t have the pressure of needing to sell your current home within a specific time period.
The downside is that you will likely need to figure out a rental or temporary accommodation until you buy. That is of course, if you don’t buy something within the settlement period.
If you buy first, you will have the comfort of knowing your next move and not having to pay for accommodation in between selling and buying. However, this may make selling more stressful as you’ll need that money to finance your next loan and you won’t have the luxury of time on your side.
Talking to a Flint broker can help guide you through this process and work out what order is best for your unique situation.
Selling your home
Pros
- Finances will be freed up to purchase a more expensive home.
- You won’t be servicing multiple loans.
- No need to worry about managing an investment property.
Cons
- No investment property, and therefore less capital growth.
- The emotional aspect of saying goodbye to your old home.
- There are costs associated with selling your home, including Capital Gains Tax (CGT).
Selling your home can be a good way to help fund your next property purchase. If you are interested in selling, get in touch with a trusted real estate agent who can help get your campaign started.
It’s important to understand that there are costs involved with selling your property. These may include marketing, agent fees, conveyancer/solicitor fees, styling, auctioneer fees and CGT. You will also need to keep the property in pristine condition while inspections are taking place or vacate your home for the campaign. In the latter case, you will need to factor in the cost of a rental or short stay accommodation.
Once your property has sold, you will need to lodge your discharge of a mortgage. During settlement, your conveyancer/solicitor and your lender will be present to organise any funds to be repaid to your lender. This discharge of the mortgage will then be lodged with your local land titles office to prove you do not have an interest in the property anymore.
Keeping your current home as an investment
Pros
- You will have an investment property, and therefore a bigger portfolio.
- Rental or short stay/holiday accommodation returns.
- The opportunity to claim tax deductions on your rental.
Cons
- Potentially being limited on what you can spend on your next property.
- Managing and servicing multiple loans.
- The responsibility and costs of managing an investment property.
If you’re not quite ready to sell your home, you could consider keeping your current property as an investment. This will allow you to potentially benefit from rental income, which could contribute to mortgage repayments and operational expenses of the property – leading to positive gearing.
Retaining your original home as a rental property also introduces a new source of income and diversifies your financial portfolio. However, it’s essential to determine if this strategy is feasible and the most beneficial for your circumstances. A Flint broker will be able to advise whether this is the right option for you.
Finding your next property
It’s not your first rodeo so you probably have a good idea of what you need, where you want to live and what you can afford. However, if you are purchasing in another state or territory you may need to go back to the drawing board and do your research.
Researching homes on a property portal such as view.com.au can be a great place to start. Another good idea is to attend inspections and auctions of similar properties in suburbs that you are interested in to see what they sold for. You can also save properties in your property portal app and track the results.
If you’re planning to buy in a different area, visit regularly and spend time in the local neighbourhood to make sure it’s a good fit. Keeping up-to-date with property news on this new suburb or state and what the median house/unit price currently is, will help you maintain a realistic idea of what you can afford.
When it comes to upgrading, make sure that the property you like fits with your new considerations. Is it big enough for any lifestyle changes? If you have children, are you happy with the school zones? What about the location – does it suit your changed needs or wants? Just like buying your first home, you want to ensure your next home feels like the step up you’re hoping for.
Buying your next home
Similarly to when you purchased your first home, you need to make sure you have all your financial ducks in a row when it comes time to buy your next property. Speaking with a Flint broker will ensure you are organised and ready to put in an offer or bid when your dream home hits the market.
If you come across the perfect property, and your current home hasn’t sold yet, you can put in a subject to sale offer. This means that the offer is subject to the sale of your current property and the sale won’t go ahead until it has sold. This is not possible for properties sold through an auction process.
A bridging loan is another option that may help alleviate the stress of selling and buying a new home. You can apply for a bridging loan if you are ready to make an offer on a new property, but haven’t yet sold your current home. A Flint broker can advise whether this option is appropriate for your situation.
If the thought of trying to sell and buy at the same time feels stressful for you. Consider selling your home first and look to buy later. Not only will your funds be readily available when you find your dream home, but you won’t be rushed into purchasing something in a short window of time. However, you should be mindful that not buying and selling in the same market could mean rising prices and interim housing costs.
Conveyancing and settlement
Since you’re upgrading, conveyancing and settlement will not be foreign concepts to you. What may prove challenging, however, is trying to coordinate settlements of your current and new properties.
If you’re selling your current home, and are looking to purchase another, you may want to try and organise a simultaneous settlement. This process means settlement for both transactions will occur on the same date. This can be tricky to coordinate so it’s wise to seek assistance from your conveyancer or solicitor.
If you’re ready to upgrade, book your free consultation with Flint today. Get clear guidance and smart mortgage solutions to get you into your next home faster.
