The Essentials of Selling Your Home and Buying Another

Upsize or Downsize?

Depending on your stage of life and needs, selling your current property and buying another could be a result of:

• A growing family and the need for more space. The two bedroom unit you bought before the kids arrived is no longer suitable
• The kinds have left home and you need less space
• A job opportunity elsewhere
• Desire to move closer/further away from the city/country
• Property with lower maintenance requirements
• Move to a specified suburb to be within a particular schools catchment area

Whatever the reason, here are some common items to consider

1. Timing

• Do you try and sell your property first and then look for a property to buy? Do you do it the other way around?
• Can you arrange a simultaneous settlement so they both settle on the same day?
• If your current property settles before the property you are buying, where will you live in the interim?

2. Costs

• Have you worked out your numbers on how much it will costs to sell your property pay the costs necessary to purchase another property? A good rule of thumb is that it will cost 3-5% to sell and 5-6% to buy. That is paid for from your property equity.
• If the property you are buying settles before the sale of your current property, have you got the correct loan arrangements in place?
• If you are buying a more expensive property, do you have sufficient borrowing capacity to afford the new loan?
• How much will it cost you to move?
• Are there other alternatives? Ie renovating and adding on rooms if you want a bigger home.
• If you have limited equity in your current property, will you incur Lenders Mortgage Insurance when you buy again?

3. The Process

If you have a loan on your current property and this will either continue or increase when you buy your next home, prior to listing your property for sale, it would be prudent to confirm that you can afford the ongoing loan.

This is a fairly simple and quick process to confirm your borrowing capacity. Confirming this before you get too excited avoids any future unpleasant surprises and heartaches if your borrowing capacity isn’t sufficient for your needs. You may consider applying for loan pre approval to give you  comfort your lender will accommodate your needs.

Typically you would list your current property for sale first. At the same time you can be researching your desired location and understanding the prices and property quality available.

Once you have an unconditional contract for the sale of your property, you can consider making offers on property to buy and sign a purchase contract (subject to your legal advice).

Your lender can then complete the assessment of your loan application and approve your loan.