No matter how much you love your home, there comes a time for many when thoughts drift to ‘where next?’ Perhaps you’re crying out for more space. Or want to use your equity to move closer to the beach. Maybe you’ve changed jobs, or just want a change of scene. Whatever the motivating factors, the thought of buying a new home can be intoxicating.
But before you start your search for that bigger, better, brighter, greener, more conveniently located new home there are a few things you should think about. One of the first being that age-old question for upgraders. Do you sell your current home first then buy? Or buy your new house first then sell?
Start with the market
Real estate markets can vary between states and even suburbs. So talking to a real estate agent about the state of the market in your area could play a big part in answering that question for you.
Typically, in a buyer’s market, the sensible approach is to sell your home first. That’s because in this market there are more homes for sale than buyers and homes stay on the market longer. So if you got into a situation where you couldn’t sell your home, you could be left juggling two home loans or paying bridging finance for an extended period. That could get costly.
In a seller’s market, however, buying first could be the way to go, as there are more buyers than there are houses for sale and your current home is more likely to sell quickly.
Keep in mind that there may be a third scenario where the markets in the selling location and buying location are different. In that case it is really important to do your research and work out what the best approach is for you.
But the market is just one consideration. A big one yes, but there are a lot more pros and cons to consider. These can help you see what will work best for you and avoid undue financial pressures or costs.
This is widely considered to be the less risky and safer approach, but can also be less convenient.
- By selling first you will know exactly how much money you have to spend on your new home and therefore what you need to borrow.
- Saves you the stress and cost of paying two home loans at once, or paying for costly bridging finance. If your current home doesn’t sell quickly, this financial pressure could lead to you accepting a lower offer on your home.
- By negotiating a longer settlement (90 days for example) you can give yourself more time to look for your next property. It’s not unknown for sellers and buyers to even negotiate extended settlement periods of up to 6 months or more. It’s worth at least asking the question, because the buyer could be in the same position as you.
- If you haven’t found or moved in to your next home by the time settlement day arrives, you will need to rent and handle the costs and inconvenience of moving twice. There are options – like staying with family or friends, or putting your furniture in storage and living in a hotel. Both, however, can be costly, both financial and emotionally, especially if it takes a long time to find your new home.
- If property prices are rising and there is a large gap between selling and buying your next home, you risk being priced out of your ideal location and getting less house for your money. If you’re looking for something very specific, a rising market like this could pressure you into buying something that’s not quite right.
This is potentially a riskier strategy, but also offers the advantages of giving you a better opportunity to find your ideal home and can work well in a seller’s market.
- For many, the whole process only starts because they stumble upon their perfect home. In this instance, buying first may be the only way to ensure you don’t miss out on that special property.
- If you buy first, you can usually expect to settle on your new home first and can simply move in – therefore this scenario can remove the hassle and costs of having to rent and pay removalists twice.
- If house prices are rising quickly, you could potentially get a bargain on your next home, while letting the market upswing add to the value of your current home.
People who buy first may over estimate the selling price of their current home and find themselves in a financially difficult position on settlement of their existing home.
- If you have a mortgage on your current home, you will have to juggle two loans, or take out costly bridging finance or a deposit bond, to be able to buy before you have the funds from your sale.
- It could take longer than you have estimated to sell your home, especially if it’s a slowing or buyer’s market. This can put pressure on you to sell your current property for far less than you would otherwise have accepted.
Talk to a specialist
Once you’ve added up the pros and cons of buying or selling, it really pays to talk to a home loan specialist. Our ING home loan specialists can help you assess how much equity you may have and give you an estimate of the value of your current property. From there you can get a clearer indication of how much you may be able to borrow with the help of our borrowing power calculator. They can even help with loan pre-approval, if you’re at that stage.
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