Upgrading your home is an exciting move, but it's no small feat. Even though you've been through the home-buying process before, buying your next home brings its own set of unique challenges.
You're juggling the decision of whether to sell your current place, managing a bigger mortgage, planning for lifestyle changes and possibly even relocating to a new suburb or state.
Why consider upgrading your home?
Here are some of the most common reasons why you might be considering upgrading:
- You need more space for a growing family, pets or aging relatives.
- You want to enjoy better features like a bigger backyard, a pool, more storage or a larger kitchen.
- Strategic financial growth could be on your radar.
- Your current home isn't your dream home and you're ready for something more.
Getting your finances right: Plan ahead for your next move
When it comes to budgeting for your next home, it's best to get in touch with your broker or lender sooner rather than later. Having these conversations early on will help you figure out how much you can borrow, whether you can handle bigger repayments, and if you should sell your current home or hold onto it as an investment.
Just like buying your first home, you'll likely need a 20 percent deposit to avoid Lenders Mortgage Insurance (LMI).
But don't stress, your broker can help you figure out if you can buy with a smaller deposit.
Plus, if you've built up equity in your current property, that could be the key to unlocking your next dream home.
Should you sell or buy first? The tough decision
One of the toughest decisions is whether to sell your current home or buy a new one first. The timing can get tricky, and the stakes are high.
If you choose to sell your home first, one of the main advantages is that it frees up your finances, giving you more flexibility to purchase your next property when you're ready.
Additionally, you won't feel the pressure of needing to sell quickly. However, one downside is that you might need to find temporary accommodation, like renting, until you purchase your new home, which can be a bit of a hassle.
On the other hand, buying your new home first means you'll know exactly where you're going and won't have to worry about securing a rental in between. This eliminates the stress of scrambling for temporary housing.
The downside to this approach is that selling your current home could become stressful, as you'll need the funds from the sale to finance your new purchase, and there may be less time to negotiate or wait for a better offer.
Chatting with a broker will help you work through these options and figure out which one makes the most sense for you.
Selling your current home: The pros and cons
If you decide to sell, here's what you need to know:
Pros:
- The money from the sale will help you buy a more expensive property.
- You'll only need to manage one loan, not two.
- No dealing with the hassle of being a landlord if you don't want to.
Cons:
- You lose out on the potential capital growth of an investment property.
- It's emotional to say goodbye to a place that's been your home.
- Selling comes with costs like agent fees, marketing, and potential Capital Gains Tax (CGT).
When you're ready to sell, contact a trusted real estate agent to kickstart the process. Remember, there are costs involved like marketing, agent fees, and possibly CGT - so make sure you're prepared. You'll also need to keep your home in great shape for inspections or even consider temporary accommodation if you're not staying in the home during the campaign.
Once it's sold, your mortgage will be discharged, and the process of settling up with your lender and conveyancer begins.
Keep your current home as an investment: Weighing up the pros and cons
Not ready to part ways with your current home? Keeping it as an investment could be a solid option.
Pros:
- You can start building your investment portfolio with a rental property.
- Rental income might help cover mortgage repayments.
- You can take advantage of tax deductions for your rental property.
Cons:
- You might face limits on how much you can spend on your next home.
- Managing two properties could mean juggling multiple loans.
- Being a landlord comes with its own set of responsibilities and costs.
If you're considering this route, consult a broker or financial adviser to figure out if holding onto your current property makes sense for you.
Finding your next property: Research is key
By now, you probably have a good sense of what you need and want from your next home. But if you're relocating to a new suburb or even a new state, it's time to do some fresh research.
View.com.au is a great tool for scoping out homes and comparing prices. Make sure to attend inspections and auctions in your desired areas, as these can give you a clearer idea of what properties are actually selling for. You can save your favourites through the View app and stay on top of the latest listings.
If you're buying in a different area, take time to explore the neighbourhood. Spend some time there, meet the locals and get a feel for the place. Keep an eye on property news and trends in your new location, too.
Making sure the property fits your lifestyle
Much like when you bought your first home, you want to make sure your next place ticks all the boxes. Does it have enough space for your growing family? Is it in the right school zone? Does the location suit your new lifestyle needs?
Take your time to ensure your new home really aligns with the changes in your life.
Time to buy: Ready, set, go!
By the time you're ready to buy, you'll want all of your finances in check. If you're still waiting for your current home to sell, you can make an offer 'subject to sale'. This means your offer is contingent on selling your existing property first, so there's no pressure to rush.
Another option is a bridging loan, which helps cover the gap between selling your old home and buying your new one. Your broker or lender can walk you through whether this is a good fit for your situation.
Not keen on trying to juggle selling and buying at the same time? Consider selling first and buying later. This way, you have a clear financial picture, and you won't feel rushed into buying. The downside is that you may face rising prices and the cost of interim housing, but it can be less stressful overall.
Conveyancing and settlement: Wrapping it up
You're no stranger to conveyancing and settlement, but coordinating both sales and purchases can get tricky. If you want both transactions to happen on the same day, you'll need to plan a simultaneous settlement. This can be a bit of a logistical challenge, so it's a good idea to get your conveyancer or solicitor involved early to ensure everything goes smoothly.
Upgrading your home is a big decision, but with the right planning and expert advice, it can be one of the most exciting moves you'll ever make.
