How to buy a new house before selling your existing one
So you own a home but want to upgrade to a new one that is more suitable for your needs. Ideally you will sell your existing property and have the funds ready for your new purchase.
Or even better, you will sell your old property and buy your new one and settle on the same day. However, given the current property environment, it’s easy to sell, but it is proving very difficult to find the right property. Given this, many people are concerned about ending up homeless, so they’re buying before their selling.
You have two options to fund a new home before selling your existing one.
There may be more costs to buying an investment property than you realise.
Avoid any nasty surprises by making sure you’re property informed.
Option 1: Take out a new home loan outright
If you have sufficient savings or equity in your existing property, you can apply to the bank to get approval for additional debt. The bank will factor in your total income and expenses, and work out if you can afford the new loan while maintaining your current one. This is the best solution if you can get approval, as it leaves you with maximum flexibility as well as the ability to choose your home loan product carefully.
Option 2: Take out a bridging loan
If you can’t get approval for the additional money, then you can consider a bridging loan. Bridging loans are very commonly used for home owners when the timing of selling their existing house does not coincide with the purchase of a new one. The bank will forward you the funds you need to buy your property while taking security over both. When the old property sells, the bank will be able to reduce your loan to a pre-specified amount and return the remaining funds to you. But you are required to sell your old property within a certain period so you’ll have less flexibility than the first option. Not all banks offer them, and those that do have varying structures, credit policies and restrictions.
Using the options above will allow you greater flexibility to find the property that’s right for you. Just be sure to take the time to get approval, so you’re not rushing around before settlement and avoid any nasty shocks.
Speak to our team today to see how you can achieve your financial goals.
One of our mortgage brokers will contact you to discuss the following:
- Get to know your financial objectives
- Help you to understand your borrowing capacity
- Take you through how we can assist you with your finances
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