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Buying a New           While Selling Your Current Property?

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When you’re transitioning to a new family home, there are three main approaches to consider:

  1. Selling Before You Buy

  2. Using Bridging Finance

  3. Buying Before You Sell with a Subject to Sale Contract

 

Owning two properties simultaneously can lead to higher debt and associated risks, so it’s important to weigh the pros and cons of each approach to see if bridging finance is right for you.

Selling Before You Buy

Pros

  • Certainty of Budget: You’ll know exactly how much you have for your next purchase.

  • Control Over Sale Price: You can wait for a satisfactory offer on your property.

  • Reduced Pressure: No need to worry about selling your current home within a limited timeframe, especially if the market slows.

Cons

  • Housing Availability: Your ideal home may not be on the market, which could mean moving into temporary rental accommodation.

  • Additional Moving Costs: You may face the inconvenience and expense of moving twice.

  • Potential Price Increase: If market prices rise after your sale, you could be priced out of your desired home.

 

To ease the transition, consider these options:

  • Negotiate a longer settlement period to allow time for finding a new home.

  • Arrange a rental agreement with the new owner to stay in your home temporarily.

  • Stay with family or friends and store your belongings to avoid rental costs while you search.

  • Opt for furnished rental accommodation to avoid moving twice.

Buying Before Selling (Subject to Sale Contract)

A Subject to Sale Contract allows you to make an offer on a new home while stipulating that the purchase is contingent on the sale of your current property. The contract usually gives 30 days to secure an unconditional sale of your home.

 

Pros

  • Secure New Home: Provides peace of mind that your new home is secured before selling.

  • Single Move: If you coordinate settlements, you only need to move once.

  • Market Protection: Reduces the risk of being priced out of the market if prices are rising.

Cons

  • Higher Offer Needed: Sellers in a rising market may expect a higher offer to accept a conditional contract.

  • Budget Uncertainty: You may need to be conservative with your spending as your sale price is not yet confirmed.

  • Time Pressure: Selling under a deadline could impact your sale price expectations.

 

Bridging Finance

A Bridging Loan is a short-term loan to help finance your new property while you work to sell your existing one. Lenders typically provide a six-month period for selling your current home.

When you obtain a bridging loan, the lender typically combines the mortgage on your existing property with the new purchase, called Peak Debt, which includes the existing loan, the new home’s purchase price, and costs such as stamp duty and fees, minus any cash input.

 

Bridging loans often allow interest-only repayments, and in some cases, interest can be added to Peak Debt until the original home sells. Once sold, the sale proceeds reduce the Peak Debt to End Debt, which is then repaid as a standard mortgage.

Pros

  • Interest-Only Option: Some lenders offer interest-only loans with interest capitalised, payable from sale proceeds.

  • Single Move: Avoids rental and moving expenses.

  • Flexible Timeline: No pressure to quickly find a new home.

  • Market Advantage: Allows you to sell at a good market price without rushing.

Cons

  • Limited Lender Options: Not all lenders offer bridging loans, and some only for existing customers.

  • Higher Interest Rates: Rates are typically higher than standard mortgages.

  • Pressure to Sell Quickly: May push you to sell your property sooner to meet the loan’s time frame.

  • Shortfall Risk: If your home sells for less than expected, you may need additional funds.

 

 

Bridging Finance FAQs

 

How Much Equity Is Required for Bridging Finance?

You generally need at least 50% to 60% equity in your existing property for bridging finance to be an option.

 

What Are the Interest Rates?

Bridging loan interest rates are usually higher than regular mortgage rates, often at a lender’s standard variable rate without discounts, plus administrative fees.

Can Bridging Loans Be Paid Off Early?

Yes, bridging loans are short-term and designed for quick repayment. Terms are typically six months when buying an established home or up to 12 months for new builds.

 

What Happens After My Property Sale?

Once your property sells and Peak Debt is reduced to End Debt, the loan will transition to the home loan product chosen during your application.

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©2024 Fortifi Finance

info@fortifinance.com.au
0419 550 734

 

Disclaimer

This website has been prepared with all due diligence and care, based on the best available information at the time of last update. Fortifi Finance holds no responsibility for any errors or omissions within. Any decisions made by other parties based on this information are solely the responsibility of those parties. Capstone Mortgage Solutions Pty Ltd ACN: 665 796 234 is an authorised credit representative 547296 of Australian Finance Group Ltd ACN 066 385 822 (AFG) Australian Credit Licence 389087.

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  • Instagram
  • Facebook
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©2024 Fortifi Finance

info@fortifinance.com.au
0419 550 734

 

Disclaimer

This website has been prepared with all due diligence and care, based on the best available information at the time of last update. Fortifi Finance holds no responsibility for any errors or omissions within. Any decisions made by other parties based on this information are solely the responsibility of those parties. Capstone Mortgage Solutions Pty Ltd ACN: 665 796 234 is an authorised credit representative 547296 of Australian Finance Group Ltd ACN 066 385 822 (AFG) Australian Credit Licence 389087.

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