History rarely repeats itself and this is certainly true of buying a home second time around. As an established — or next time buyer — you have experience on your side but there are many new challenges to encounter that you may not have dealt with as a first home buyer.
Here are the answers to the most commonly asked questions by next time buyers.
Can I move my mortgage from one property to another?
The ability to transfer your home loan to another property without incurring exit or entry fees is known as portability and it is a common feature of the vast majority of loans. Portability is useful if you have your home loan set up just the way you like it and you sell your home and move into a new one before the mortgage is fully paid.
Portability cannot be used in all situations because it requires that exchange and settlement for both properties happen on the same day and at the same time. It is also better suited to situations where the loan amounts between the properties are the same — if you need extra funds you may have to make a new home loan application or pay additional fees on top of the increase in mortgage repayments.
Should I sell before I buy?
There are strong arguments both for and against either option. Selling first means that you don’t have the financial pressure of supporting two loans until the second property is sold, but it also means you have to find interim accommodation for yourself and your belongings.
Buying before you sell allows for an easier move but you will need to obtain bridging finance to cover the gap between the sale of one property and the purchase of another. The interest rate on a bridging home loan is usually on par with a standard home loan interest rate, with a term of between 6 and 12 months.
Bridging loans can be complex and you need to be sure you understand the fine print and have the finances available to cover the cost. Your mortgage broker can help you choose the right kind of bridging loan for your needs.
Can I use the equity in my existing home as a deposit?
Yes, this is one of the advantages available to next time buyers. It is especially useful if you buy before you sell because it provides you with a low-cost solution to coming up with a deposit. Another option available is to use your redraw to access any extra repayments made on your existing home loan.
If you would like to contact one of our advisers and make a loan/financial planning enquiry, please contact our office on 02 8065 3318 or info@financialgenius.net.au