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- Want to upgrade your home to a newer or larger one? It's a good time to re-evaluate your loan options
Buying a new home and arranging a new loan ...
Overview
If you are thinking buying a new home (as a non-First Home Buyer) or upgrading your existing home – you've come to the right page. If you are a first home buyer - best to go to our first home buyer page or our no deposit home loan page
If you currently own a home (or previously have) and now want to purchase again, there are a number of ways you are able to do it. Which is best for you is dependant on your individual situation...
You can either
- Upgrade your existing home - if you currently have a home and want to upgrade see Upgrading below.
- Buy a New home – if you don't currently own a home (but have previously), and now want to purchase a new home again. See Buying a new home below.
Upgrading
If you're wanting to upgrade your existing home to a new one, then you've got a number of options ....
Buy First – Sell Later
Buying first and then selling later is preferable to most people because it means you only have to move house once. Whether you can do this however depends on whether your income meets the requirements of the various lenders and whether your equity position is suitable.
Generally you'll benefit if you can keep your loan % to no more than 80% of the value of your properties during and after the process. For example if your current home is worth 500K with a 200K loan and you want to purchase 750K new home and need a 785K loan to buy it, then your total loan during the period where you hold both properties will be 970K with a property value of 1.25M. This means your loan% is ~79% which is preferable since it is less than the 80%. This way you will avoid any mortgage insurance premium and minimise any lender restrictions that may come into play with a > 80% loan scenario. By doing the upgrade in this manner you have complete flexibility on decisions on when to sell your original home, whether to rent it out for an interim period, or whether to renovate to improve its value prior to sale etc assuming your income and equity permits.
If your equity position is not quite this strong, then you can still may be able to undertake such a transaction however you may have a mortgage insurance premium to pay. Alternatively we may be able to find you a lender who'll allow this via a bridging loan (see below).
Sell Your Existing Home First – Then Buy Your New Home Later
You may want to sell your existing home first and then buy your new one. This method probably gives you the best capacity to buy a higher priced new home because you will be starting from a position of less debt (seeing you would have sold your existing property and paid out or down any existing loan) and maximum deposit (remainder of the sale proceeds).
The main downside for going this route is that you will usually be without a property for an interim period of time (unless you manage to arrange simultaneous buy and sell settlements) and will therefore most likely need to find interim accommodation in between.
Bridging Loans (a loan that "bridges" the period whilst you sell your previous home)
Various lenders have bridging loans that allow you to do either of these options above however you should be ensure you fully understand the bridging loan you agree to as sometimes they can have some onerous terms and conditions such as a time limit to sell your old home beyond which penalty interest rates are charged. If you are happy with the various conditions of a bridging type loan they may be a good option because sometimes the lender will calculate your serviceability of such loans on the end debt rather than the interim debt.
Rent Out The Old Home (keep as an investment) and Buy a New Home (to live in)
A final alternative may be to keep your existing property into the future and convert it to an investment property. This may suit some people who are interested in building a portfolio of property assets. The end loan is larger so generally you will want to be confident you can afford such a situation often is possible because the rent that is received on the new investment property (ie your old home) partially offsets the cost of the loan. Such situations allow higher gearing into the property market which may suit some investors.
Buy a New Home (Non first home buyers)
This section is for people who've previously owned property (but don’t anymore) and now want to buy a home. If you're in this category then some of the information relevant to first home buyers is relevant to you so you may want to visit the First home buyer page to read over this.
The main difference however between your situation and that of a first home buyer is that you will not be eligible for stamp duty exemptions nor the First Home Owners Grant. On the plus side however, the lenders generally do not place genuine savings restrictions on you.
The total cost price of your property will be the sum of the following
- Property Price
- Stamp duties payable (you will not get exemptions as a non-first home buyer)
- Other purchase costs ie conveyancer, loan application fees etc
In general, due to the lack of stamp duty exemptions and first home owners grant, it is a little more expensive to purchase a property if you are a non-first home buyer but the consolation is that lenders are generally less stringent on lending to you.
Remember, our service is provided completely free to you so if you are looking to buy a home or investment property in the near future, we recommend the following.. Firstly, you can click on the following link to go to our online enquiry form. It only takes 5 minutes to complete and with this information we can assess your loan options. This is not a loan application and it's no obligation..... it just allows us to work out your loan capacity and inform you of what position you are in. Also, when we send you your assessment email, we'll also include parts 1 and 2 of our free Home Loan Advice Centre e-Course. The e-Course is a 35 page indepth guide that gives you all the information you need about buying property in Australia. It goes through the common methods of purchasing property and gives an indepth description of each stage in the entire home buying process. It's especially usefull to first home buyers. Click here to see a sample of what the e-Course contains (pdf opens in new window) |
For more information please call Home Loan Advice Centre on 1300-729-177 or 02-9210-1000 or see the following links…
