With confidence returning to the property market, owners with medium-term plans to sell are asking two key questions.
Many buyers want to know if now is the right time to move, and whether it’s best to sell first and then purchase, or to find their next dream home and then put your current place on the market?
If unsure, it’s best to view your financial situation realistically.
Traditionally, a bridging loan has been needed if you want to buy first and then sell. These have always come at a price. They have a higher interest rate than standard mortgages. And if your current home takes longer to sell than anticipated, it can blast a hole in your budget.
But there are some new, specially designed options from non-bank lenders for homeowners that now seek to solve exactly this pain point. These include Bridgit, Brickfloor and Downsizer and may be worth checking out.
If you can afford a bridging loan or are eligible for an alternative financing option, buying first and then selling gives you precious time to find the next home of your dreams and ensure your existing home achieves a desirable price.
These are some dynamics to consider when choosing to buy or sell first.
Buying first
Risk equation: If you buy first, you should be confident you’ll sell your current home on schedule and at the anticipated price.
Back-up cash: If events go sideways, you’ll likely need financing in the form of a bridging loan or other arrangement to tie you over because you’ll own both properties in this scenario.
Rent option: With no sign of a buyer, can you rent to generate income to help cover the bridging loan costs? If this works, you can delay a sale until the market picks up for you.
Selling first
Security: You limit your risk by selling first, and you’ll know exactly how much you can spend on your next home.
Timing is everything: You’ll have some control over events, influencing the settlement time to suit your needs. You can even ask your buyer for an extended settlement period to allow you time to find your next home.
Nowhere to go: Life isn’t always perfect. Just because you sold first doesn’t mean you’ll find your next home quickly. Rather than rush into a purchase, be prepared to rent while you complete your search. With Australia experiencing a shortage of rental properties, that can also be a challenge.
Exiting the market: The property market moves quickly, and if there’s a sudden upturn, you could find yourself scrambling while living in a rental property. The worst outcome is discovering you can no longer afford the style and size of property you’d set your heart on.