Changing your home can be an exciting time but, negotiating the purchase of a new property and the sale of your existing home can be a tricky one.
It’s often hard to know whether to sell or buy first as you may need the proceeds of the sale to fund your new purchase but, there is also the need to live somewhere while you’re doing it and market movements can make the issue more complex.
The strong market times of the past made buying first less of a risk as properties were likely to sell well but in a downturn properties can take longer to sell…
Buying first; purchasing your new property before selling allows greater control over asset selection as you’re making decisions in your own time frame but it does rely on having a strong financial position.
Buying first isn’t an option for most but high income earners with good equity are better equipped because securing finance for the new purchase is relatively easier and a good finance broker can make the difference with a successful outcome.
For those without the means to hold two properties, bridging finance can cover the cost of the new purchase until the existing property is sold, although interest rates are slightly higher and finance will be conditional on the sale of the existing property.
Buyers who rely on the sale of their home to fund their new purchase have less flexibility when buying first and increasing the pressure to sell by a firm date so it’s important that the existing house is ready to sell…since if you don’t sell, you can’t settle.
Selling first; selling before you buy allows you to avoid certain risk factors and provides the certainty of a set budget as you will know your exact finances.
Having funds ready for a purchase can be an advantage for the decisive buyer while an extended settlement period for the sale of your existing property can provide additional time to choose the right home and if managed well, should coincide with settlement of the new home.
On the other hand, renting for a short period after the sale can allow a more considered decision process when buying and although it requires moving twice, may be useful when moving to a new area, as it gives you the time to see if the area is suitable for your new home.
Another option; Keeping your property for rental income and selling at a later date is another option but not many people can afford to do that and it is a long-term strategy so, seek advice from a finance specialist as structuring, gearing, finance and taxation issues will be involved.
Market and finance knowledge is invaluable and can help upgraders and downsizers decide which steps to take and which options may be available to them so, speak to your finance professional for advice on all the options available to you and possibly some you may not have even considered...