Selling, then buying?

[Agenda]

I'm sure this has been done before but what is the best process for selling current PPOR and buying a new PPOR (upgrading)?

I'm currently in a unit which is fully renovated and ready to sell, we presume it will sell quite fast as others similar to ours go within a month. So, is it best to organise our finance now, purchase a new property and ask for a long settlement and then quickly put our current PPOR on the market?

We can afford bridging finance for maybe 3 or 4 weeks but that would be it.

How have others managed this situation?

 

[CHam]

I'm sure this has been done before but what is the best process for selling current PPOR and buying a new PPOR (upgrading)?

I'm currently in a unit which is fully renovated and ready to sell, we presume it will sell quite fast as others similar to ours go within a month. So, is it best to organise our finance now, purchase a new property and ask for a long settlement and then quickly put our current PPOR on the market?

We can afford bridging finance for maybe 3 or 4 weeks but that would be it.

How have others managed this situation?

I would recommend selling first and then deciding on a new purchase. At least that way you know exactly how much you have to spend.

Presuming that it will sell fast is no guarantee that it will in the current market, and unless you can afford to service both loans as a worst case you could end up with serious headaches.

You can always rent whilst looking for the new PPOR which ensures that there is no rush!

 

[sanj]

there is absolutely no way i would be buying in this market without selling first if we're talking PPOR

only being able to afford bridging finance for 3-4 weeks means that unless you sell your property within a month you are going to be hurting

 

[Peter_Tersteeg]

From a financiers perspective, there's a few ways to do this...

1. Propose that your existing residence would become and IP. You'd need to get a rental appraisal & show you can afford both properties when taking into account the proposed rent. You also need to have sufficient equity or cash for the deposit on the new property.

2. Sell your existing property, then buy. The sale settlement occurs on or prior to the settlement of the purchase. You need to show the bank an unconditional contract of sale.

3. Bridging finance. The combined peak debt can't exceed 80% of the combined value of both properties. You have to be able to show you can afford the debt once your current property is sold. You need to show you've got enough cash to cover the repayments for 6 months (4 weeks isn't enough time to reasonably sell).

Any of these options could potentially work for you, but the application needs to be presented in the right way and will depend on the figures of your purchase, sale and current debt levels. Even if you don't have much cash today for option 3, there are ways around this if the afore mentioned figures work out.

 

[Agenda]

Thank you - very helpful

PT_Bear - For point 2, is there a minimum / maximum period of both properties settling? Say if there is a cross over of a week or two?

Seems all so comoplicated, don't know how anyone does this....

 

[Peter_Tersteeg]

They either settle on the same day, or the property you're selling settles before the property you're buying. There's no other timeframe involved.

This structure essentially shows the bank that the money to complete the purchase will be coming from the sale, so the sale has to happen first.

Us brokers do it all the time...

 

[Agenda]

Thank you!

 

[RumpledElf]

We went through all the options and the only one that worked for us was simply getting a new loan assuming we were keeping our old house vacant. So, the worst option of the lot - just servicing two loans for the next 25 odd years on our regular income, no rental income assessed.

On the upside, this does mean that when our old house is sold or rented we have a totally unaccounted for windfall. The sale proceeds would be about $20k shy of paying out the new loan and the minimum rent I expect is slightly more than we need to pay on the new loan (@7.8%).