Trying to work out how to navigate the process of buying and selling property?
Having to sell your existing home before you buy a new one comes with all sorts of stress, hurdles and potential costs. The main dilemma you will be faced with is timing and cash flow or access to finance which can make the process feel more difficult than it needs to.
That’s why it’s important to know what your options are and the implications of each scenario so you can make an informed decision based on your circumstances. In this article we'll cover:
Let’s start by looking at the big picture and what you need to consider if you are buying and selling property at the same time.
Before diving into the buying and selling process, take the time to ask yourself some key questions before making a decision.
Let’s now look at what options you have when selling and buying a home at the same time.
There are a number of scenarios open to you if are selling with a view to buying a new property, including:
Sell before you buy and you know exactly how much you have to put toward your new home. This may appear to be the only option available if you have no equity in your current home.
The downside of this approach is either needing to buy a new property in a short time frame once your current home is sold or having to find somewhere else to live temporarily while you look for your next home. This could mean renting or staying with family or friends in the short term.
If the market is hot and it takes time to find a new property, you risk getting less for your money as time marches on.
If you have enough equity in your home or have family who can help you financially, you could buy a new property before you sell your current home. This will also mean you have to cover two mortgages for an unspecified period, something you need to be sure you can afford.
You could also negotiate a longer settlement with the buyer of your current home or try to coordinate simultaneous settlement, an option we’ll take a closer look at now.
Simultaneous settlement is where the sale of your current home and the purchase of your new property happens at the same time.
This is an ideal scenario for many, but it's not always possible to arrange. If you or your conveyancer can make it happen, it means you don’t have to worry about paying two mortgages simultaneously or renting while finding a new property to buy. The risk is, if one of the transactions is delayed, you could end up paying penalty interest or losing your deposit on the new property.
One way of getting around this is to agree on a longer or extended settlement period, typically up to 6 months. Once you have found a new property to buy you can move the settlement on your current home forward so that both properties settle on the same day.
You can also make your purchase subject to completion of the sale.
As the term implies, purchasing subject to completion of the sale means you can insert a condition making the seller of the property you are buying wait for you to sell your home.
The seller obviously has to agree to this condition, and you may have to make it worth their while waiting by making a generous offer. You can also specify deadlines for the sale of your home to settle by, which could help convince them to agree to your offer.
In terms of financing, you also have the option of applying for a bridging loan.
A bridging loan—also known as bridging finance or a relocation loan—can help you to purchase a second property while you sell your existing property.
It provides finance to cover the gap between receiving funds from the sale of your existing home and buying your new property. Your lender will typically provide the mortgage on both properties during the bridging period, which often runs for 12 months, though this depends on the type of bridging loan you take out. Once you sell your current home you can settle your bridging loan, and the loan reverts to a standard home loan.
This means you don’t have to wait for your existing home to sell before buying a new property, and you can:
The downside to a conventional bridging loan is that they are often expensive, hard to qualify for and tend to come with high interest rates. These factors can rule bridging loans out for many buyers.
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Disclaimer: Doorsteps Finance Pty Ltd ACN 648 541 879 (credit representative no.531036) is authorised under Doorsteps Solutions Pty Ltd ACN 654 334 246, Australian Credit Licence 537369 (together, “Doorsteps”). Doorsteps are not making any suggestion or recommendation about any particular product or service. The information provided constitutes information which is general in nature and has not taken into account any of your personal objectives, financial situation, or needs. Any credit application made through Doorsteps Finance Pty Ltd is subject to approval, terms and conditions, fees and charges.
Disclaimer: Doorsteps Finance Pty Ltd ACN 648 541 879 (credit representative no.531036) is authorised under Doorsteps Solutions Pty Ltd ACN 654 334 246, Australian Credit Licence 537369. Doorsteps Solutions Pty Ltd ABN 60 654 334 246 and Doorsteps Finance Pty Ltd ABN 27 648 541 879 are not making any suggestion or recommendation about any particular product or service. The information provided constitutes information which is general in nature and has not taken into account any of your personal objectives, financial situation, or needs.