There are a lot of reasons why you may want to upgrade your home or move to a new home.
You may have found that you’ve outgrown your current home, maybe you are in an apartment and want to move to house? Maybe you need more space as your family grows? Maybe you want to move to a better location or want to be closer to schools or work.
Whatever the reason we can help you with the best path forward. Have a chat to us and understand your options.
If you are looking to sell and buy a new home then there are different ways to approach this.
You can sell your home first, then use the money left over to purchase another property using a new loan. If you can find a new home at the same time as selling your old one, you can sell and buy on the same day to easily transition to the new home without renting or staying with family in between.
If you want to purchase a new home before you sell your current home, this can be possible using a bridging loan which provides finance on both properties while you wait for the sale of your previous home. To qualify for this option, you need to have enough equity in your current property.
If you are looking to keep your current home as an investment property rather than selling, we can explore this with you to see if its possible using the equity in your current home to purchase your new one.
The rental income on the new property adds to your income and should help you cover any loan repayments on your property
Loans for renovations are possible using the equity in your home. In many cases money can be obtained by increasing your existing loan, providing you full control of the funds to go and renovate as you please. However often for substantial renovations or extensions a construction loan product is needed Click here for more info
The majority of lenders allow for 6 months to sell your existing property. Further time can be requested on a case by case basis, however 6 months is generally ample time to sell a house in a metro location.
All lenders have different approaches, generally you need to have higher level of income relative to other loan products and plenty of equity in your existing property to qualify for a bridging product. Lenders look at the transaction as a whole, they look at the total loan (peak debt) during the period of bridging between properties and also the resultant loan at the end (end debt).
A bridging loan is a convenience loan product.
A bridging loan enables you to move into a new home straight away and take your time to sell your existing property. You may want to complete some renovations on the property your selling or you may not want to rush to sell to maximise your selling price.
Bridging loans can also make it easier for you to complete some renovations on the property you are purchasing prior to moving in. You can live in your existing property while completing those renovations and not have to worry about alternative living arrangements.
The total loan during the bridging period is funding you have obtained enabling you to temporary holding both properties at the same time. You are paying much higher interest costs compared to having a loan only on a single property. During the bridging period repayments vary between lenders, and can be any of the following; interest capitalised to the loan, interest payable monthly, or a combination of all three, interest capitalised, interest only and principal and interest repayments. Some lenders charge an inflated rates of interest during the bridging period equivalent to the standard variable interest rate, others discount variable interest rates, and in very limited cases fixed interest rates during bridging.
Do your research, get professional advice and understand loan products available to you and explore all your options. Your level of income, level of savings, household budgets, and any changes to your circumstances in the future are all key factors in determining what loan type is best for you.
Deciding between variable and fixed interest rates is a personal preference. We can talk you through the options currently on offer and help you with this decision.
Variable rate home loans are generally more flexible and have more features than fixed rate home loans. The interest rate fluctuates with the market ensuring you always have a market rate for your home loan.
Features of variable loans can include such things as redraw facilities and extra repayment options.
Fixed Rate home loans ensure you have the same repayment over a fixed term. You lock in your interest rate and initial repayment over an initial agreed term usually between 1 and 3 years. Fixed loans have less flexibility and often have restrictions to redraws or extra repayments over the fixed term. If you look at breaking your fixed rate home loan, you will generally have to pay a break cost which can be quite significant.
Redraw is a loan feature that allows you to access any early repayments made on your loan repayments on your loan. For example, if you made $5,000 in advance repayments on your home loan, a redraw feature allows you to get access to the $5,000 of repayments, put $5,000 back into your bank account, and increases your loan back to where it previously was as if you had not made those repayments in the first place.
An offset account is a separate bank account that is linked to your loan. For any funds held in your bank account, automatically offsets against the loan when it comes to the bank paying interest. For example, if your loan balance is $400,000 and you have $5,000 in your offset account, you only pay interest on $395,000.
A loan redraw feature is generally availiable in all basic home loan products. An offset is seen as a premium feature, generally home loan prducts that allow this feature often come with additional fees and higher interest rates compared to the basic loan products.
In the fine print of many lenders terms and conditions a lender could refuse a redraw request or ask you for further information on use of the funds. This does not happen often, but can happen. If you want full peace of mind in gaining access to your additional repayments or excess savings, then its best to get an offset feature.