Buying your next home
I want to buy a home to live in but I need to sell my current home to afford it but I won't have anywhere to stay. What do I do?
One option is to place a subject to sale offer on the new property you are looking to purchase, however given a competitive property market, this is not a favourable offer from the seller's point of view. This is due to the fact that the enter sale is dependant upon the buyer selling their own property to use the funds for the new home, but selling a home is not a overnight process. It can range from a couple months, sometimes stretch to a year or even more. This can make your offer not too appealing.
To avoid this, you can apply for a bridging loan and offer a standard finance clause in the contract of sale. This allows you to borrow the funds required for your new property as well as hold onto your current property until you offload it. This allows for a seamless transition to move into your new property without having to move in between temporarily. Imagine what it would be like without this, you would need to sell your property, move into a rental, or a mate's or wherever and then move again once your new home is ready. All those boxes! Twice! Your back will thank you later.
01.
Bridging Loans
Bridging loans are short-term financing solutions used to facilitate property purchases when there's a delay in selling an existing property or funds aren't immediately available. They offer quick access to funds with flexible repayment options, typically interest-only, but come with higher interest rates and fees due to their short-term nature. These loans are favoured for their speed of approval and funding, making them suitable for competitive property markets or time-sensitive purchases like auctions.
02.
Cross-securitisation
If your leveraging equity in an existing property to purchase an another property, never cross-secure the two securities with the two debts, even if this means paying double the application fees. This is to avoid the bank having control over what you want to do with your properties and keeping that power in your own hands. If ever you want to sell one of your properties, as it has appreciated in value, the other security and it's debt can limit your earnings.
03.
Deposit Bonds
Deposit bonds are used as an alternative to paying a cash deposit upfront. They act as a guarantee to the seller that the buyer will fulfill their contractual obligations. This allows buyers to secure a property without tying up their funds in a deposit immediately, offering more flexibility in managing their finances. However, it's important to note that deposit bonds usually incur fees and may require the buyer to meet certain eligibility criteria set by the issuer.
04.
Loan Features
Loan features determine borrowing costs and terms. P&I loans involve paying both interest and principal, gradually reducing the balance, while Interest Only loans require only interest payments initially, potentially increasing overall costs. Fixed-rate loans offer stable payments over a set period, while variable-rate loans fluctuate with the market. Offset accounts reduce interest by offsetting savings against the loan, and redraw facilities allow access to extra repayments. Choosing the right features hinges on individual financial needs for cost-effectiveness and flexibility.
Things to consider when buying your next home
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