We're upgrading our family home and can't decide on this.
Should we sell our current home first, then buy a new one? Or should we buy a new one, knowing we'll have a place to move to, then sell our current home?We need the equity in our current home to buy our new home, so that the mortgage insurance can be avoided.
If the settlement date of our current home is earlier than the settlement date of our new home, then it's ideal…
However, this is all "depends" and "ifs".Those who have faced the same problem, please help.. Any advice is appreciated.
Hi Christina
I'm a real estate agent as well as a financier and I come across this question each day.
The problem does have two sides
1. sell first – can't find the right property
2. buy first – have to sell your current home for a cheap price to ensure you can settle the purchased property.Solution: its better to have the money in the bank, especially in a tough market when days on sale are exceeding 45days. Sell the property 1st, get a long (90day+) settlement and ensure you have a unconditional contract before purchasing.
I would even extend to not looking at any properties until you are sold, you might get heart broken if you fall in love with a property and it gets sold.
Good Luck
ksherwell wrote:Solution: its better to have the money in the bank, especially in a tough market when days on sale are exceeding 45days. Sell the property 1st, get a long (90day+) settlement and ensure you have a unconditional contract before purchasing.
Thanks for the reply..
A question..why a long settlement?I have started looking to buy for 3 months but haven't got anything. (I was so close to getting one, but was outbidden..
)
My other concern is if my current house settles later than the house I am buying, then we'll have a huge mortgage insurance.And my current bank only released equity to 80% LVR, which doesn't help much.Long settlement gives you a chance to do it all in one go.
I.e., sell with 90 day settlement then find and buy a new one with settlement due on the same date. Also, even if that isn't your goal, it at least gives you more time before you need to be paying rent or whatnot while you're purchasing.
I agree totally for what its worth. In today's market I can't think of anything worse than buying something new and then trying to sell in a hurry to get at your equity.
I've done it the other way and it worked, but that was in a fairly hot market where I timed an auction of my current home such that settlement would be the same day, then the banks/solicitors just work the money side of it out.
You could always set up an LOC secured against your existing home to fund the deposit for your new home. The LOC would then be paid back when you sell your current home, which could be after settlement happens on your new home.
Of course you need to be able to service both the loans at the same time. And you also run the risk of not being able to sell your current home for a price you are hoping for.
Cheer,s
LukeBy selling your PPOR before your new purchase, you lock in today's price in a falling market (in most capital cities at present). A delayed settlement (on the PPOR) will allow you time to shop around for a house which closely matches your requirements and to negotiate a settlement period on the new house which closely ties in with the transfer of the old house – thus minimising the period where you will be holding 2 houses or no houses.
ChristinaM wrote:ksherwell wrote:Solution: its better to have the money in the bank, especially in a tough market when days on sale are exceeding 45days. Sell the property 1st, get a long (90day+) settlement and ensure you have a unconditional contract before purchasing.
Thanks for the reply..
A question..why a long settlement?I have started looking to buy for 3 months but haven't got anything. (I was so close to getting one, but was outbidden..
)
My other concern is if my current house settles later than the house I am buying, then we'll have a huge mortgage insurance.And my current bank only released equity to 80% LVR, which doesn't help much.Christine, with enough notice, you should be able to match the settlements on the same day. The exception comes if the person your buying off is doing the same.
I once had 2 properties settle which had another 3 parties (3 sales) involved. The 6 separate solicitors had to arrange the settlements in order. A few hairs was lost but all got done.Again in a down market its best to sell your home first. If we were in a boom I would suggest the opposite
Hope this helps
luke86 wrote:You could always set up an LOC secured against your existing home to fund the deposit for your new home. The LOC would then be paid back when you sell your current home, which could be after settlement happens on your new home.Of course you need to be able to service both the loans at the same time. And you also run the risk of not being able to sell your current home for a price you are hoping for.
Cheer,s
LukeExcellent point. If your borrowing capacity allows this – it can be a great option.
Cheers
Jamie
Jamie Moore | Pass Go Home Loans Pty Ltd
http://www.passgo.com.au
Email Me | Phone MeMortgage Broker assisting clients Australia wide Email: [email protected]
Thank you all for your input.
I'm selling now! My property will be listed next week and finger crossed!I think I agree that it depends on the market condition.
In a hot market, you will probably buy first. In a market like what we have experienced at the moment, selling first makes sense.
You sell and you know the price you sell for.. This helps because you know how much you can afford for your new house.The only downside is where are you going to live if you can't find the house you want to buy within your time limit (settlement)
I am a solicitor and have seen many people get into trouble. Many will sell and buy at the same time and assume the sales will go through as per the contract however things don't always happen this way.
Imagine having to be out of your house tomorrow so the new purchasers can move in. At 4pm you find out there is still a tenant in your new house and he is not going to move out because he cannot find accomodation.
Or the new buyer refuses to settle because there is a stratch on the kitchen floor that was supposedly not there before.
These sorts of things have a domino effect too. The tenant in your new home won't move out so you cannot settle of your sale. This could in turn affect the person buying the house of the guy buying your house as he cannot move out either.
Idealy you should be able settle on the sale before the purchase, or have enough funds to have both houses for a period of 6 months at least.
Another problem is committing to a purchase thinking you will be able to sell your house quickly and then finding it is harder than expected. This often leads to immense pressure and results in people selling their house much cheaper because they don't have the time to wait.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Terryw wrote:I am a solicitor and have seen many people get into trouble. Many will sell and buy at the same time and assume the sales will go through as per the contract however things don't always happen this way.Imagine having to be out of your house tomorrow so the new purchasers can move in. At 4pm you find out there is still a tenant in your new house and he is not going to move out because he cannot find accomodation.
…….
You're exactly right. that's exactly the reason why this question is such a headache!!!!
there are problems either way…You sell first. You're out in the street if you can't find a new place or the new place is not ready for you to move in.
You buy first. You might find that you can't sell and access your equity that easily… and you end up repaying two mortgages…Or, you sell and rent for a period of 6 months while you look for the new one.
This is the safest way, but then you have the hassle of moving twice!
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Terryw wrote:Or, you sell and rent for a period of 6 months while you look for the new one.This is the safest way, but then you have the hassle of moving twice!
In the past 7-8 years, my husband has lived in 3 cities and I have lived in 5 cities. And in each city, we moved houses as well. I absolutely hate moving houses ever AGAIN!
We've decided to sell first and try to get a long settlement. In the worst case, we'll have to pack and live with his parents for a short period of time!(We did this before when we moved to Melb from Syd!)
Finger crossed this time!
Parents come handy in a situation like this!!!
I helped someone move a few months ago and it is a pain. Wouldn't want to do it twice in a few months, thats for sure.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Terryw wrote:I helped someone move a few months ago and it is a pain. Wouldn't want to do it twice in a few months, thats for sure.We moved houses so many time, but that was when we had no kids.
Now we have a 7 1/2 month old boy.. Moving houses will be much harder (my son has more stuff than I do!!!)
That's one of reasons why we want to sell and know how much we can fetch and how much we can afford for our new house. Something more permanent. I do not want to move for the next 15 years so we need to find a place that can meet our evolving needs (another kid etc)..that has a potential to extend..
Hi ChristinaM,
I also agree on selling it first then you can buy new one after. By selling first you know how much money you’ll be getting on closing, which helps you establish a price range for the new home.
Hope it can help you!
All the best,
Elea
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