An important consideration especially when you're building!
Anyone who has sold a home to buy (or build) another will attest to the fact that it can be stressful working out where you're going to live in between times if you're not fortunate enough to settle the properties on the same day.
With this in mind I thought I'd take a more in depth look at the options you have from most common to pretty obscure!
Sell/Buy on the same day
This is the ideal option and to be fair it's what happens for most people. Yes you've got a whole lot of chaos with packing up a house and moving whilst the people who bought your house want to move in to yours and the people you bought off are moving out of theirs (your new one!).
Yes it's chaotic but lawyers are used to transacting things like this on the same day and it means it's all done and dusted and everyone can get on with their lives.
Hold on to your property until after you've moved in to the new one
This is a good option if you can, especially if you're building a new house. However it relies on you meeting the bank's lending criteria for having your existing mortgage plus the new one on the new property.
Due to the banks not doing bridging finance as such now (not in the way they did before the Responsible Lending Code came in) they require you to be able to afford the lending on both properties. They may, however, include rental income for one and this could make a big difference.
If you've got good equity and income then this is a handy option as you only have to move once.
Stay with family
This is a classic choice for young people/families who are building. I know we all said we'd never move home again but when you've got the expense of a brand new home and that awesome light at the end of the tunnel it's well worth doing.
Because you start paying the mortgage on your new build progressively as it is being built, the expenses are rolling in. That makes staying with family a great option rather than having to pay rent or the mortgage on your old home.
Rent your old property off the new owners
If you need the money from the sale of your property to buy the new one but don't want to move on the same day you may be able to rent your current home off the new owners for a few weeks to allow a super smooth changeover. This isn't going to work if they want to move in of course, but you'd be surprised how often people might be downsizing and have the ability to do this or they might be buying it as a rental property. There are a number of cases where this works well.
Rent something in the meantime
For a good portion of people when they're building they will have to do this. As I mentioned above the bank require you to be able to make the payments on your mortgage as if you had it for the entire term of the loan. So even if you might only be paying the mortgage on two properties for six months or so and have a buffer to cover this the banks won't allow you to have lending that is beyond what you could afford in the long term. Nor will they allow you to go outside the LVR limits imposed by the Reserve Bank.
The downside is that you have to move twice but there's in upside in not having such a fixed date you have to be out the rental you're living in. There may be some other wild and wacky ways to get around this situation but these are the ones that 95% of people use.
The key points are
- You need to adhere to Reserve Bank LVR rules
- You can only borrow what the bank deem you can afford long term
- You can keep both properties if your LVR and income fit
- Everyone's situation is different.
Ask and make a plan that best suits youI hope you found that helpful and of course we're here to discuss which options will work for you and make things as easy as possible.
Adam, Claire, Greg and the My Mortgage Team