With confidence returning to the property market and the traditionally busy Spring selling period fast approaching, owners with medium-term plans to sell are asking two key questions.
We are frequently asked by our clients 1. ‘is now is the right time to sell and move?’ and 2. ‘is it best to sell first and then purchase, or to find their next dream home and then put their current place on the market?’
The answer to 1. is typically very personal, with any number of different reasons for you to sell. We are always happy to discuss the pros and cons based on our experience, but generally, if you feel the time is right then trust your gut and start planning your next move.
The answer to 2. can be more complicated and, if you are unsure, it’s best to take a more analytical view taking into account your financial situation.
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, these interest costs can really eat into in your budget.
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 they may be worth exploring further if you intend to secure bridging finance.
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 the best price.
These are some dynamics to consider when choosing to buy or sell first.
- Risk equation: If you buy first, you should be confident you’ll sell your current home on schedule and at the anticipated price. Don’t forget to factor in possible extended settlement times.
- Back-up cash: If events don’t go to plan, you’ll likely need financing in the form of a bridging loan or other arrangement to tide you over because you may own both properties in this scenario (at least for a period of time).
- 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.
- Security: You limit your risk by selling first, and you’ll know exactly how much you can spend on your next purchase.
- 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, this can also be a challenge – don’t leave it until the last minute.
- Exiting the market: The property market (especially in Sydney) 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. Do your homework first and make sure you have a realistic idea of where you will buy and what you will need to spend to find a suitable property.
For a confidential discussion regarding your property plans please don’t hesitate to contact any one of our expert sales team.