When it comes to buying or selling a home there are costs involved and it can be stressful. But buying a new home when youre selling your old home can be even more difficult. While it can be done, its important to be prepared for any challenges and to have a contingency plan that can give you options if your original plan goes pear-shaped. This will allow you to meet any challenges head-on and to negotiate your way around any speed bumps that you may encounter with minimal damage.
So whether youve decided to downsize, suburb-skip or have a tree-change, it is possible to successfully buy a new property while selling your existing home. Lets look at how you can achieve this with the least amount of effort and cost.
1. Get your home ready for sale Before you put your home on the market and start looking for a new property, take time out to make your existing property look its best. Pack-up any belongings you dont need and put them in storage. Minimalize your clutter. Paint inside and outside of your home, if its looking tired. Fix or replace anything that is broken, such as light fittings or switches. Dust and clean out cobwebs. Tidy-up your garden and even consider putting in a few new plants to give your home pizazz. You want your existing property to sell as quickly as possible, so youll have minimal time where you own two properties. This will also help you to reduce your mortgage costs and stress.
2. Sort out your finances Before you buy and sell a property, its important that you get your finances in order. Talk to your lender so you know what you can and cannot afford to borrow and just how much you need to sell your existing property for, so that you can afford to buy the type of home you want in the location you desire.
Also look at your existing expenses and pay off any smaller debts, such as credit cards and car loans, before you put your existing property on the market. This will reduce your financial stress, increase your borrowing power and reduce your overall financial commitments giving you more residual cash.
3. Have your existing property valued – If you havent already done so, then have your existing property valued so you know exactly how much its worth. This will allow you to estimate how much equity you have in the property and just how much youll have to spend on your new home.
4. Research home loans – Its also important for you to research home loans and whats available in terms of rates and features. Dont just use your existing lender because youve been with them for years. Compare home loan products and lenders critically to find the best home loan for you and your circumstances.
5. Negotiate settlement terms when you buy When you find a new home then make sure to negotiate your settlement period. If you need longer to sell, then push the usual 6 week settlement period out to 10 or 12 weeks. This may give you enough time to sell your existing property. If you live in South Australia, then you can put subject to sale in your contract conditions, then if your existing property doesnt sell you have the option to withdraw from the contract. Some other states may allow you to add this clause to your contract, but youll need to check with a property solicitor (conveyancer), as real estate laws differ considerably between states.
6. Consider bridging finance If you buy a new home, before you sell your existing home then youll need to take out bridging finance. This will allow you to cover the mortgage and the interest costs of both properties. Depending on the state you live in, some lenders may offer you an interest only loan on your existing property, rather than bridging finance, as this is a more cost effective alternative.
However, before you take out any loan make sure you check the interest rates, terms and conditions, as some bridging loans attract a much higher rate of interest. In addition, make sure you know what costs are involved with each of the loans as you may have to refinance, which could incur fees and charges.
7. Contract clauses If you think you may sell your home faster than stated on your contract, then have your real estate agent or solicitor add a clause that allows you to bring the date of settlement forward. You can also add this clause to the contract on the home youre selling, if you opt for a longer settlement. This way you can go in search of the right property for you, if you havent already found one.
8. Have a back-up plan You may have no problems selling your existing property and buying a new one. Everything may flow perfectly, without any hitches. But, its vital that you have a plan in place if events dont occur as expected. Otherwise you may find yourself homeless or in a world of debt.
So before you start searching for a property and put your home on the market, ask family and friends if you can live with them while you search for a new home, if your existing property sells sooner than expected. Alternatively, look at short-term accommodation options and work out how much these will cost you. It is also important that you budget for the expense of storage and make sure that you can handle the costs of two mortgages if you buy before you sell. Otherwise, you can elect to rent your existing property to help you cover your costs.
Are you seeking to buy a new home before you sell your existing? Then call eChoice, we can discuss your options with you and find an affordable solution.
Written by eChoice
Since 1998, eChoice has helped more than 50,000 Australians secure a home loan through its network of over 25 lenders and hundreds of loans. Best of all our service is cost and obligation free!