Is it time for the next move? More space for the kids, relocating to another part of NZ, or perhaps you’ve built up equity and that upgrade you’ve dreamed of is now in sight?
Buying a new home is an exciting time, but managing your mortgage needs from one property to another can be a bit of a juggling act. And as with all juggling acts, you’ll give yourself a much greater chance of finishing the show without dropping any balls, by doing some sound planning first.
Here’s a few things to think about when moving from A to B:
Sell then buy or buy then sell: What’s right for you?
Unfortunately, there is no simple answer to this question – the right way to go will depend on your property plans and financial circumstances, and may also be influenced by market conditions – i.e. whether it’s a buyer’s or seller’s market at the time. Here are a few things to ponder as you consider your approach:
The advantages of selling first: (1) you won’t fall into the all too common trap of overestimating what buyers will pay for your current property before you make an offer on your next home – i.e. you’ll know exactly how much money you have to spend, (2) you can avoid having to cover two mortgages during the transition from one property to the next.
The disadvantages of selling first: (1) depending on the settlement date of your current property, you might need to organise interim accommodation – i.e. renting or staying with family – which means two moves and extra cost, (2) in a rising property market, selling first can mean that you get less for your money if it takes a while to find your next property.
The advantages of buying first: (1) often buying first comes down to that perfect property being there for the taking, and not wanting it slip through your fingers… that’s a pretty big upside, (2) if finances allow, buying first means you can move from your current home straight into your new property – no extra rent / accommodation costs or the hassle of a double move.
The disadvantages of buying first: (1) you’ll need to cover the mortgage on your existing property as well as on your new property for a period of time, (2) a double mortgage commitment can create pressure to sell as fast as possible, and risks jumping at less than expected offers – particularly if the market is slow and time is ticking on.
Mortgage options for selling and buying
Bridging finance. If that perfect property is beckoning and buying before you sell is looking probable, one option could be Bridging Finance – an interest-only (usually) mortgage to buy your new house before you sell your existing home. Bare in mind this means you need to cover the cost of both mortgages until you sell. As with all options – there are pros and cons; we welcome you to get in touch to find out more.
Loan portability. If you sell first, one option you could consider is taking your existing mortgage with you on the move to your new property. This means you won’t need to establish a completely new mortgage – which will save you certain costs – and can make the whole process smoother. Basically, in this scenario, your lender would substitute your new property as security for the mortgage; it can be a good option if breaking fixed rate term(s) would be too costly (falling interest rate market), or if you have a sharp rate you’d like to keep (rising interest rate market).
Check out your options: Of course, buying a new property is also a great opportunity to review your mortgage options for the next leg of your home ownership journey. It’s a good time to peruse the market for not just a sharp rate, but a mortgage structure that will support your short and long-term goals. Getting some good advice at this time is a sound way to explore your goals and find out what would work best for your needs.
We hope this has been a handy read, but would guess that it has likely raised a few more questions. You’re welcome to get in touch to talk through your plans and options – any queries, just let us know.