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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 ...
If you're thinking of buying a new home (as a non-First Home Buyer) or upgrading your existing home – you've come to the right page. If you're a first home buyer - best to go to our first home buyer page or our 95% 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 can do it. Which way 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.
* Note - NSW Home Builders Bonus (until 30 jun 2011) - Off-The-Plan purchasers in NSW buying a new "previously unlived-in" (ie new build or a full renovation of a previous build) home up to $600,000 cost price receive a 100% stamp duty exemption via the NSW Home Builders Bonus up to 30 June 2011 or a partial stamp duty exemption for similar properties currently under construction.
Upgrading
If you're wanting to upgrade your existing home to a new one, you can do it in a number of ways ....
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 $300,000 with a $100,000 loan and you want to purchase $500,000 new home and need a $520,000 loan to buy it, then your total loan during the period where you hold both properties will be $620,000 ($100,000 + $520,000) with a property value of $800,000 ($300,000 + $500,000). This means your loan% is ~77% 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)
If you've previously owned property (but don’t anymore) and now want to buy a home again then information relevant to first home buyers is somewhat relevant to you so you may want to visit the First home buyer page to read over this after you read this section..
The main difference 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. This means that your required deposit will be higher at any property cost price, compared to a first home buyer.
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
Since the banks will lend a maxmimum of 95% of the underlying property cost price, the amount of deposit required by you will be equal to 5% of the underlying property cost PLUS stamp duties and any other smaller government charges (ie registrations) PLUS other buying costs (conveyancer, loan application fees etc). For example a $500,000 home purchase in NSW for a non-first home buyer would require about $45,000 deposit. See sample loan report.
Home Loan Advice Centre's loan service is provided to you completely free of charge. We can do this because our lenders (30 of Australia's main lending institutions) pay us commissions based on the wholesale volume of loans our group refers to them. We can therefore, offer you our experience and expertise, and guide you through the entire home buying journey, without charging you a cent. You end up with exactly the same loan if you'd organised it through a bank yourself, but we do all the leg work and negotiations with the banks for you ..... a great result! So if you are looking to buy a home or investment property visit our 5 minute online enquiry form. We'll assess your loan options and send you a full report of your capacity. Also we'll include parts 1 and 2 of our eCourse ... an indepth guide to buying property in Australia. Click to see a sample. |
For more information please call Home Loan Advice Centre on 02-9210-1000 or see the following links…
