Selling Current House to Upgrade to a Larger One

Lziggyy on 09/03/2020 - 14:48

Hi All,

Just after some general advice before I proceed to speak to either a bank/financial advisor for more detailed information.

Paid off my current house (probably worth $350k in the current market) and have squirreled aside about $120k. We are planning to buy a larger house with a budget of $520-$550k with a year or so. We will also sell the current house once we find something we like, using all the balance to repay the loan.

In the meantime, does that means I'll have approx. $400k (80% of $350k+120K) to use as deposit and need to loan about $150k?

So what would be the type of loan options we should be looking at? Bridging loan/Interest only?

Thanks:)

Financial

Comments

  • Slippery Fish on 09/03/2020 - 15:09
    +2

    You have 120k to use as a deposit. Until you have the $ you don't have the $

  • elgrande on 09/03/2020 - 15:11
    +5

    I always admire people who have paid off their house in full coming to OzBargain for financial advice..

    • HighAndDry on 09/03/2020 - 16:05
      +5

      I think people confuse us (people who like to pay cheaper for things) with people who're financially responsible…

  • ihbh on 09/03/2020 - 15:36
    +9

    Next time don't pay the current house down; put the funds into an offset account. Move the funds from the offset account to your new principal place of residence. Then you can keep the current house as an investment property and get a deduction for the interest. This way you don't incur transaction costs for selling the current house (and maybe buy an investment property down the track).

  • floppy on 09/03/2020 - 16:18

    do you mind me asking whereabouts in Aus do you live?

    • ziggyy on 09/03/2020 - 16:24

      Perth.

    • Godric on 09/03/2020 - 18:34
      +2

      Didn't think you'd need to ask, upgrading with a budget of $550k, won't get you far in Melb/Syd ;/

  • dcep on 09/03/2020 - 16:24

    if you didn't sell it prior buying , you'll only have $120k + (whatever you can redraw out of current homeloan)

    or you can refinance your current homeloan to get the money out

  • ziggyy on 09/03/2020 - 16:27

    Thanks for the comments, did some quick reading during lunch and will definitely do some proper research first. Seems like selling first before buying makes better sense since the market is slow.

    • dcep on 09/03/2020 - 16:38
      +1

      you'll have to move out and rent while hunting for new house if you sold it 1st

      or do 60/90 days settlement (if there's willing buyer for that term)

  • JimmyF on 09/03/2020 - 16:55
    +2

    You'll be needing bridging finance etc.

    But in the current market its 'risky' to buy before you sell, as you might get stuck owning two houses or selling the first one first cheap.

  • spal on 09/03/2020 - 18:04

    If you like your current home, and expect to see further growth in long term, you may not need to sell the house to buy a new property. Banks will consider your funds for buying a new property to be $180k (80% of the value of fully paid up property) + $120k (your savings)= $300k as your deposit. If you want to borrow up to 80% of the new property, you should be able to borrow up to $1.5m. Issue could be around servicibility of the loan, which would be calculated based on your current sources of income plus rental income from renting out your current home (after you have moved into the new property).
    Another trick borrow to the level banks would lend you, and stick any surplus funds in offset account. This way you can get higher discount from the lender (always based on the value of your borrowing), and you will pay off the loans faster, as repayment will be based on borrowing, but interest calculated only on the outstanding loan funds.

  • serpserpserp on 09/03/2020 - 18:17

    I think before any good advice can be given we'd need to know your free cash flow position. If you want to buy a house for 550k will your current earnings support paying it off in the time you have before retirement? If so, might be best to keep the house you have and just get a new loan for the second property.

    If you are dead set on having the minimal amount of debt but your cashflow and still support an extra ~550k (or whatever the finance number needs to be), buy the new house first and then sell the current house so you don't miss out on what you want and there is probably no need to sell quickly.

  • brendanm on 09/03/2020 - 18:30

    Rent out your current place, use the rental income to pay some of the mortgage on the new place. When the property market picks up there later on, you can then sell for a much better price, perhaps pay off your new place.

  • Lockster on 09/03/2020 - 18:47

    if you are looking for a free market appraisal please let me know, I work in real estate (not in the sales team) we can help you out! Give me a PM if you want the contact to the person to ask some questions about anything. I work in Perth :)

  • ziggyy on 09/03/2020 - 19:14

    Whoa, thanks for all the replies. We just in the early days of planning so lots of stuff to pick up and appreciate the alternatives some have suggested. I'll definitely speak to a bank/FA later down the road when things are more certain.

    At the moment, I don't think we'll consider the renting route, market's generally bad and I can see several new lots coming up around my area, so that'll probably press the prices down even more in the near future. Generally conservative here financially, so aiming for a lower debt if possible.

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