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12 Steps to Christmas – Next Home Buying

Welcome to our 12 Steps to Christmas, our guide to advance your financial health by Christmas 2024.

For our South Australian homeowners, the residential market is continuing to build upon the substantial growth recorded since 2020. Many homeowners find themselves with significantly more equity than predicted only a few short years ago, which is fuelling many homeowners to consider buying their next home and capitalising on a sellers market.

In this edition of the 12 Steps to Christmas, we highlight the strategies many take toward buying their next home and how capitalising on your equity position can work for your individual circumstances.

Subject to Sale

Selling your existing home to buy your next home is what most homeowners will find themselves having to do. 

For many Australian homeowners, upgrading or downsizing to your next home will involve the sale of your current home to assist with the next purchase. A ‘subject to sale’ scenario basically entails that you will sell your existing home prior to buying your next, ensuring you have your sale funds ready to assist with buying your next home.

In an ideal world, you could sell your current home and settle on your next home the same day, however in reality that can be somewhat of an awkward timeline. Without a simultaneous settlement day, you may be in a position where you temporarily need to find accommodation before the settlement and moving into your next home.

Transition to Investment

A common way to buy your next home is to turn your existing home into an investment property, utilising the available equity to assist with the purchase of your next home. This is a popular way to expand your wealth portfolio or to maximise taxation benefits by transitioning your current home to an investment, should you have the borrowing capacity and equity position to facilitate the next home purchase.

It is also a really flexible way to purchase your next owner-occupied home, should you have the borrowing capacity and equity position to do so. This strategy can eliminate the high interest rates and complexity of bridging finance. It also negates the stress of buying your next home subject to sale of your existing home, and in turn having to align simultaneous settlements or source interim accommodation.

Bridging Finance

Bridging Finance will allow you to purchase your new home before you sell your existing home. This is a great option to ensure you don’t miss out on your new purchase.

Bridging Finance is a great opportunity if, for instance, your current home isn’t quite ready for sale, it can give you some extra time to get your home ready looking spectacular and on the market. Importantly you won’t be tempted or intimidated into settling for a smaller offer on your current property because you are anxious to get into your new home or you have a Real Estate Agent who is pushing for a sale. So essentially Bridging Finance gives you time.

Lender’s policies vary, but most usually allow six months to sell your existing home. Lenders may need you to make interest only payments on your existing home and your new home in addition to costs for the purchase, or they may allow you to capitalise these charges to the eventual payout amount on your existing home loan. It is really important to understand how a particular bridging product works, and how that will concern your repayments and net sale proceeds.

Get started now!

Purchasing your next home is an exciting time and certainly one you’d like to make with confidence. Obtaining your home loan pre-approval will give you both peace of mind and allow you to focus on the exciting part of searching for your first home.

There are a few lenders who provide home loan pre-approval, and whilst it gives you an approximate guide of how much you can afford to borrow, it is still conditional on a lender approving the home you purchase, a satisfactory property valuation, and Lenders Mortgage Insurance approval (if applicable).

Real Estate agents and vendors may look favourably upon your pre-approval when placing your offer, as it’s a great first step in gaining full home loan finance approval and reflects your commitment to purchasing your potential home.

We will also guide you through other important steps in the home buying journey, such as:

  • choosing a suitable loan product
  • researching properties to buy
  • how to bid at auction or structure an offer
  • meeting settlement and how to pay for the property
  • your post-settlement loan journey

To chat about your first home goals, simply call 08 8300 8300 or click contact us today.

Important Information

*The information provided in this article is general in nature and does not take into account your personal circumstances. Since everyone’s personal situation is different, this article should not be taken as advice. Market commentary is based on recent economist reporting and references can be made available upon request.

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