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How to sell your home while buying a new one

How to sell your home while buying a new one

Whether you’re upsizing, downsizing, sea-changing or suburb-hopping, one real estate challenge remains the same – how to buy and sell at the same time?

Yes its possible – thousands of Australians manage this financial feat every year – but we’re not going to pull the wool completely over your eyes – the whole experience is going to be fraught with nervous decisions and unwelcome costs.

Once you’ve accepted that, then its time to start preparing, because the more organised you are, the better you’ll be able to negotiate the hurdles you’re bound to come across.

Get your finances in order

It you’re buying and selling at the same time, you don’t have to worry as much about what the market is doing.  Focus on where you want to move to and what boxes you want it to tick.

Talk to your lender about your borrowing capabilities.  You’ll need to know what your loan to value ratio is on your existing property, and a ballpark figure on what it’s likely to be on the new one. An up-to-date evaluation on your house will help determine this, because the chances are, your property value has gone up if you bought it a while ago.

Do some quick research on what other lenders are offering first and approach them for competitive quotes if you don’t think you’re not getting a good deal from yours.

Spruce up your house

Once you’ve dusted off your finances, consider doing a very quick tidy up of your current place.  Now is not the time to launch into full-scale renos, but if you can, a lick of paint, maybe re-sand the floorboards and a professional clean will make a difference. Agent Bridget from Bridget Kraft Property says first impressions are everything when it comes to selling.

“If you know your house is a no-frills house, then the first impression really will be critical to set the buyer’s mood. This is called the ‘curb appeal’ and if your home is not able to look ‘fantastic’ then make it at least look ‘promising’ from the outside,” Kraft says.

Negotiate the settlement period

The length of the settlement period is critical, particularly for anyone wanting to sell and then buy.

Founder and Managing Director of propertybuyer.com.au Rich Harvey, recommends negotiating a longer settlement period when selling your home to give you more time to find your next home and move into it without having to rent elsewhere.

“The settlement period is usually six weeks, but negotiate a longer settlement period to give yourself 10 or 12 weeks.

Kraft says there is no time limit for a property settlement, provided all parties agree. “I’ve seen periods of time at lengths as long as sixty, ninety, or even one hundred twenty days.

Add a special clause

Whatever settlement period you agree on with your buyer, consider including a clause that allows you to bring it forward in the event that you find your new home faster than you expect.

Or if you buy before you sell, negotiate a long settlement on the purchase of the new property and ask for a clause to allow you to bring forward the settlement date.

Bridging finance

If you buy before selling you will need a bridging loan. This allows you to temporarily own both properties by paying your existing mortgage plus interest on the finance for the new home until you sell your old place. In other words, your mortgage debt will be a lot bigger over the bridging period.

Bridging loans are not for the fainthearted.  They often attract higher rates and can include penalties if you don’t sell in the allocated time.  Usually that’s between six to 12 months, so double check this with your lender and read the fine print.

Additionally, you may not qualify for bridging finance if you still owe more than 80 percent of the value of your current home.

Have a back-up plan

Chances are you’ll be able to successfully sell and buy within the negotiated settlement period, but have a backup plan just in case.  You don’t want to feel pressured into buying your next place if it doesn’t feel right.

Before you start the entire process, talk to family or friends about the possibility of living with them for a few weeks, or look at short term rentals on sites like AirBnB.   That way if it does take you a little longer than you think to find your dream home, at least you’ll have a roof over your head.

If you go down this path, remember to budget for storage and the costs of two sets of removalists, but at the end of the day, these costs are relatively minor when compared to a house.

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Learn more about home loans

Why does Westpac charge an early termination fee for home loans?

The Westpac home loan early termination fee or break cost is applicable if you have a fixed rate home loan and repay part of or the whole outstanding amount before the fixed period ends. If you’re switching between products before the fixed period ends, you’ll pay a switching break cost and an administrative fee. 

The Westpac home loan early termination fee may not apply if you repay an amount below the prepayment threshold. The prepayment threshold is the amount Westpac allows you to repay during the fixed period outside your regular repayments.

Westpac charges this fee because when you take out a home loan, the bank borrows the funds with wholesale rates available to banks and lenders. Westpac will then work out your interest rate based on you making regular repayments for a fixed period. If you repay before this period ends, the lender may incur a loss if there is any change in the wholesale rate of interest.

When do mortgage payments start after settlement?

Generally speaking, your first mortgage payment falls due one month after the settlement date. However, this may vary based on your mortgage terms. You can check the exact date by contacting your lender.

Usually your settlement agent will meet the seller’s representatives to exchange documents at an agreed place and time. The balance purchase price is paid to the seller. The lender will register a mortgage against your title and give you the funds to purchase the new home.

Once the settlement process is complete, the lender allows you to draw down the loan. The loan amount is debited from your loan account. As soon as the settlement paperwork is sorted, you can collect the keys to your new home and work your way through the moving-in checklist.

Cash or mortgage – which is more suitable to buy an investment property?

Deciding whether to buy an investment property with cash or a mortgage is a matter or personal choice and will often depend on your financial situation. Using cash may seem logical if you have the money in reserve and it can allow you to later use the equity in your home. However, there may be other factors to think about, such as whether there are other debts to pay down and whether it will tie up all of your spare cash. Again, it’s a personal choice and may be worth seeking personal advice.

A mortgage is a popular option for people who don’t have enough cash in the bank to pay for an investment property. Sometimes when you take out a mortgage you can offset your loan interest against the rental income you may earn. The rental income can also help to pay down the loan.

What are the features of home loans for expats from Westpac?

If you’re an Australian citizen living and working abroad, you can borrow to buy a property in Australia. With a Westpac non-resident home loan, you can borrow up to 80 per cent of the property value to purchase a property whilst living overseas. The minimum loan amount for these loans is $25,000, with a maximum loan term of 30 years.

The interest rates and other fees for Westpac non-resident home loans are the same as regular home loans offered to borrowers living in Australia. You’ll have to submit proof of income, six-month bank statements, an employment letter, and your last two payslips. You may also be required to submit a copy of your passport and visa that shows you’re allowed to live and work abroad.