Planning to Upgrade Your Home?
31 May 2016 MO'R Mortgage Options
There’s a lot to think about when planning an upgrade of the family home.
Below are just some of the questions we’re frequently asked.
You can find out more about how the finance side might work, things to consider with timing and the options available in our popular Upgraders e-book. It is FREE and available for you to download here.
1. How much do I need to save to purchase a new home?
Generally, the more cash you have saved the better, as a large deposit can give you more options and potentially makes you a stronger borrower. However, since you already own property, you may be able to release some of the equity built up in your existing home. This could be used to help with your new purchase and potentially reduce (or eliminate entirely) the need for you to save a large cash deposit.
2. How much can I borrow?
How much you can borrow depends on your income, your monthly commitments and how much you have to contribute to the purchase. Each lender is different when it comes to calculating your borrowing capacity, which means that one lender may allow you to borrow significantly more than another.
We can perform all the calculations for you to determine how much you can borrow based on your current situation. Once you know how much you can afford to borrow, you can start house hunting.
3. Should I sell my existing property, or keep it as a rental property?
This will depend on your future plans and whether your personal financial situation will allow it. Many people are pleasantly surprised to learn that this IS an option for them, after we have performed an assessment of their borrowing capacity.
Even if you don’t plan on keeping both properties long term, it can be comforting to know you could cover both mortgages if required – even if it’s just while you try to sell your existing property.
4. Should I buy then sell? Or sell then buy?
There is less risk if you sell your existing property before you commit to buying another one. Selling your existing property first means you know exactly how much you will receive from the sale proceeds, which will have a significant effect on how much you can spend on a new home.
However, we know it can be difficult if you have fallen in love with a new property before your current home has sold. It’s extremely important to understand your finance options, as your personal situation may dictate the order you need to do things.
5. What is a pre-approved loan and should I get one?
A pre-approved home loan is a good idea, because it means as a lender has already assessed you as a ‘suitable candidate’ for a new home loan. It means a lender has most likely assessed your income, your current assets and liability position and agrees in principal to lend you money up to a certain amount.
A pre-approval does not give you absolute certainty of funding. It does however, give you confidence to bid at auction or put in an offer on a property you like, as it provides a price range to work within.
6. What is bridging finance and do I need it?
We feel that bridging finance is an unnecessary and costly way to finance a new purchase. We can show you other ways to achieve the same outcome, without the added expense.
If you would like further details on any of the above points, would like to discuss your own situation or have other questions, please don’t hesitate to get in touch with one of our experienced mortgage professionals.