From Sale to Purchase and all that goes in between...
Updated: Apr 23
Sell before you buy or buy before you sell?
Looking to sell your home? Should you buy first or sell first? There’s value to be had in understanding the benefits to come from each option with a couple in between.
Are you looking to upsize your home because of a growing family? Maybe you want to move to a better location because you have a bit of money saved from not being able to travel during the pandemic. Perhaps you want to down-size as you have recently become an empty nester? It’s more and more a ‘seller’s market’ in Brisbane real estate, so it’s a great time to consider taking the leap...but do you know the different options available to you throughout the process?
Nowadays, the conversation around purchasing a home focuses on first home buyers. But what about those who have already purchased their first homes and are looking for their second? If that’s you then it can be helpful to know your options and where do you start looking? If these questions are sounding all too familiar and you are finding it hard to understand where to start, look no further. We are here to guide you through your options regarding the sale to purchase maze and to support the sometimes overlooked second home buyers.
When looking to buy and sell a home, most people have a few main goals in mind:
To receive the highest price for their current house as possible
To purchase their new house for the best price possible
To go through the process as painlessly as possible
With all this being said, there are three options to consider to make this possible. From this, the two key factors that determine the most suitable choices for yourself are available time and equity.
Option 1 - Keep your current home as an investment
For whatever reason, keeping your current home as an investment is a great option. For this option, you need to ensure there is enough equity on your existing home, or available cash, to cover all the purchase costs and the new home’s deposit requirements. Equity can be a powerful tool for a homeowner as it increases your wealth on paper and gives you access to money if you need it for a home loan deposit. But how can you access your property's equity to use for a new loan? A solution in this instance is working with a trusted mortgage broker such as one from the team at Astute East Brisbane to refinance your current mortgage and borrow against it.
Refinancing not only accesses your equity but also allows for other benefits, including consolidating debts, lowering fees and saving on interest repayments.
However, there are significant tax considerations for this option as the ownership is often shared, determining who receives the benefit. So always talk to a trusted professional to ensure you are on the best path for yourself and your situation.
Option 2 - Purchase your new home and then sell
Generally, this option is the most expensive as you’re borrowing the new property’s total cost until your current homes’ sale is completed; hence, you are essentially paying for two houses. It can be broken down further into three sub-options.
This short term finance option aids in property purchase, where it bridges the financial gap between the sale of your old house and the purchase of your new one. This option could be considered if you are struggling to find a buyer for your current home and want to move into your new home before selling. There is a benefit here when an extended selling period could serve a much higher price for your existing home.
A great option to achieve a simultaneous settlement is by having an extended settlement date. Having a 60 or even 90 day settlement date allows you time to sell and settle your current and future home. This option is not advisable unless you have sufficient funds to complete the purchase without the need for any of the sale proceeds.
This option allows you time to complete your current home sale and simultaneously settle on your purchase and sale (moving from your existing home into the new purchase on the same day). It allows you to avoid the hassle of finding a rental property before moving into the new house, hence saving money in the processes. However, it is less attractive to the vendor of the property you are purchasing from; therefore, they may prefer buyers with no conditions unless your offer is appealing.
Option 3 - Sell your current home, then purchase
Selling your current home first allows you to know your purchasing power, to try before you buy if you are not looking to purchase a new home instantly and allows for a more straightforward selling process instead of having the stress of managing two home loans. It may be a good idea to put your property on the market with an extended settlement day for this option. Providing peace of mind if you have not found your next home or sorted out your next move that you can put the sale on hold. It's also advisable that you keep your selling agent updated on your plans, so if you find a new home and need to bring your home’s settlement forward, the purchase of your current home will be prepared. You also need to be ready with a backup plan for alternative accommodation just in case you don't find the right home in time.
There are many legalities to consider in each process. To be confident in your decision and to ensure that no avoidable costs or issues arise, seek the advice of a solicitor and trusted professional before you sign any contract. Furthermore, make sure that you are watching the market’s movements when going through this process to ensure that you are optimising your time on the market by matching the sale with your new home’s purchase. You should also make sure that you understand your current financial decision and live within your means. Make sure you know what you can borrow and set yourself a budget, know the current value of your property, ensure that you have/will have the money for your new deposit and repayments, understand the tax implications of your chosen option and the upfront and ongoing costs associated (e.g. stamp duty, legal fees, building and pest inspections, lenders mortgage insurance, property valuation, insurance, moving, real estate, connection, etc.).
If you would like to know more, download our fact sheet here
Here at Astute East Brisbane, we understand that this is a big financial decision and want you to be confident each step of the way. If you’re weighing up your options, call and speak to one of our trusted mortgage brokers and let us help you find the right solution to achieve your goals.
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