Upsizing your home can be an exciting process. The key considerations of (1) available deposit and (2) borrowing capacity to determine your property budget are still the same, however there are a lot more moving parts. In addition you will need to consider:
You may need to sell your current home if (1) you need the equity to help pay for your new home and (2) the loan on your current home is taking up too much of your borrowing capacity.
Even if you can afford to keep your current home, you may still want to sell if it would make a poor investment property and you can use the equity to make a higher return elsewhere.
You can turn your current home into an investment property if (1) you already have the deposit for your next home (2) you have the borrowing capacity to maintain the old loan and new loan and (3) you are comfortable with the total repayments each month.
Yes, if you can demonstrate the borrowing capacity and are comfortable with the repayments you can apply for a “cash out” to use as your deposit for your next home.
This will depend on your scenario, where we will assess your income relative to the new debt you will take on.
We will advise you of your borrowing capacity during our assessment process.
We will help you evaluate the costs and benefits of each approach as we assess your scenario.
If you need to buy your new home and sell your current home at the same time, then you will need to decide whether:
A bridging loan is a temporary loan for a 6 – 12 month period that allows you to settle on the purchase of your new home while you wait for your old home to sell.
The bridging loan is then closed from the proceeds of sale from your current home, leaving you with a residual loan or “end debt” which you then repay.
Please see the page dedicated to Bridging Loans.
A prior or simultaneous settlement is where you sell and settle your current home first so that the proceeds of sale (i.e. the money you have left over after the sale) can be used to pay for and lower the loan amount required on your new home.
Banks prefer a prior or simultaneous settlement where possible as it involves less risk. Also a prior settlement is preferred over a simultaneous settlement as lining up both settlements dates is often hard to achieve.
However, you may need a bridging loan if you have found a property you like but have not yet put your current home on the market.
Generally speaking, there is no capital gains tax paid on a home that has always been your principal place of residence.
However, you should seek the advice from your accountant who will take into account your unique circumstances.
This depends if renovating your home suits your goals and needs. The benefit of renovating over buying is that you will be able to save on paying real estate agent commissions and stamp duty.
If you need to borrow to renovate, structural renovations will need to be financed with a construction loan.
You will need to factor in the following costs of buying a new home:
If you are selling your home at the same time, you will need to consider:
Yes, we strongly recommend you hire an experienced lawyer or conveyancer to manage all the legal aspects of buying and selling your home.
Yes, we strongly recommend you seek a pre-approval prior to making an offer on your new home. This will allow you to negotiate with confidence. It will also let you know upfront if the bank will approve a bridging loan should you need one.
A pre-approval lasts for 6 months before you have to resubmit your loan application. Please note at the 3 month mark, you will need to provide an update to the bank such as providing new pay slips and confirming there are no changes to your financial position.