If you are thinking about upsizing your home, there are a number of financial questions you need to ask yourself before going ahead.
| Many homeowners make the decision to move into a larger home after getting married or starting a family, but are you aware of how much money this would truly cost you? The most important questions concerning money that you need to ask are presented below.
What information do I need when applying for a home loan? If you currently own a home and want to move up in size, the procedure for obtaining a home loan is fairly similar to what it was when you originally applied for one. Because this is your second piece of real estate, you probably have either the money from the sale of your previous property, equity in another piece of real estate, or savings. It is possible that you will be able to borrow 80 percent or less of the purchase price if you are in a solid equity position. This means that you will not have to pay the additional money that is required to pay for lenders mortgage insurance. However, keep in mind that in order to qualify for a house loan, you will need to demonstrate that you have a combination of equity and income in order to be able to make the required monthly payments. When you begin your search for a mortgage, you will need to ensure that you have the following information on hand to provide to potential lenders.
How much money am I allowed to borrow? The Australian Prudential Regulation Authority (APRA) adopted more stringent lending standards with the intention of reducing the amount of money lent by investors. Because of this, a significant number of financial institutions have tightened their standards, which has led to a reduction in the amount of money they are ready to offer. As a consequence of this, borrowers may discover that they are no longer eligible for the same levels of financing as they were in the past. Before beginning your search for a new home, it is critical to have a solid idea of how much money you will be able to borrow. But how can you tell if you are going to be affected by these changes or not? More in-depth study. Talk to a few different lending institutions and ask them to perform the computations on your behalf. If you are aware of this information before you apply for a pre approval, you can avoid wasting time and avoid having additional inquiries added to your credit report. Try out our online loan qualification here to get an idea of how much money you might potentially borrow. It can provide you with an answer in a matter of minutes and is simple to finish regardless of where you are. Simply clicking on this link will give you an idea of what the monthly loan repayments will be for various loan amounts. What other fees are involved? The cost of the item itself is not the only expense that should be factored into your budget. If you are not aware of the many additional expenditures associated with upgrading, your finances are likely to be thrown into disarray as a direct result of this decision. Here are several examples: • Stamp duty and other government fees are one of the most significant costs, and they are often paid in advance or at the time of settlement. Utilizing our calculator, you will be able to determine the amount of the stamp duty that will be applicable to your state. This calculator will also provide you with information regarding other fees, such as registration and transfer fees associated with the mortgage. • Fees for a conveyancer or a solicitor: Get multiple quotes so you know what to anticipate. Others charge a predetermined amount in addition to the charges that they have incurred on top of that predetermined amount. Ensure that you have a clear understanding of whatever option you will be committing to as well as a rough estimate of the associated costs. • Building and pest inspections: Before you commit to the purchase, your lawyer or conveyancer will advise you on which reports they believe are most important for you to obtain, such as building and pest inspections. Building and pest inspections can provide buyers the peace of mind that they are not purchasing a home with any hidden problems that they are not aware of. • Fees associated with the formation of the loan In the case of some loans, you may be required to pay an establishment fee, a valuation fee, and/or the legal costs associated with the process of putting the loan into place on your behalf. When you are evaluating loans and making your budget, it is important to have a clear notion of which criteria apply. • Lenders Mortgage Insurance (LMI): If you are borrowing more than 80 percent of the value of the property, mortgage insurance will be applied to your loan. This is the case regardless of whether or not you have a down payment. In spite of the fact that you might not have to pay it directly, it is still a good idea to seek multiple quotations and evaluate the rates offered by various lenders. Click this link for further information about the LMI. • Moving fees: hiring removalists, having to transfer utilities, finding temporary housing, and purchasing new furniture are all examples of potential charges that you might have to deal with while moving into a larger home. What happens if I want to buy before I sell? In a perfect world, you would sell the property you already own before you bought a new one. On the other hand, things don't always go as to plan. As a result of a slowing market, fluctuating prices, and simply plain uncertainty in the market, homeowners frequently find themselves in the position of looking for a new house before selling their current one. If anything like this occurs, you might require a bridge loan. You need to proceed with extreme caution in light of the possibility that additional expenses and restrictions will be imposed on you. Make sure that you give yourself enough time in advance to consider all of your choices and decide which course of action will be most beneficial to you. We know that moving up in size and buying a new house can be a difficult experience. Because of this, we work hard to make the home loan process as simple and stress-free as possible so that you can focus on locating the home of your dreams. Call our helpful team at the 13 72 62 number right now, or leave your information on this page, and they will get in touch with you. |
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You might decide to move up to a bigger house for a variety of reasons. A change in lifestyle, a larger family, an increase in income, the requirement for a home office, etc. Whatever the reason, there are a few things to think about before deciding that to upsize is the right move for you.
What am I able to spend?
It's possible that you don't have tens of thousands of dollars in savings. But the beauty of upsizing is that you can make use of the equity you've previously built up. You can borrow more money with equity than you otherwise could. It is the difference, excluding interest, between the value of your house and the balance of your mortgage.
This can be used as security with the bank to obtain additional credit. But you can only use a limited amount of your equity. Typically, banks will lend you 80% of the equity's value. This guarantees that even if real estate values decline, your debt will never be greater than the value of your home. You might be able to borrow more if you purchase Lenders Mortgage Insurance (LMI). Naturally, this will result in a longer repayment period and higher interest charges.
How much will upgrading cost?
It costs more than simply the property's cost to move up to a bigger house. You should also take into account things like:
- Stamp duty. Two key elements determine its price. They consist of your state of residence and the asking price or market value of your new home. You could be looking at anything from a few hundred dollars to tens of thousands of dollars, depending on the situation.
- Refinance costs. Included in this are fees for discharge, mortgage registration and deregistration, application, settlement, bank valuation, title search, and mortgage document preparation. These expenses total more than $1,000 all told.
- Agent fees. Typically, real estate brokers charge between 2 and 3 percent of the home's selling price.
- Legal fees and conveyancing costs. A certified conveyancer will cost you between $1,300 and $1,800, while a solicitor will set you back roughly $2,500. A solicitor offers slightly different services and levels of competence. There are numerous DIY kits available online, but hiring a professional is always the best bet for safety and dependability.
- Building and pest inspection reports. While the expense of the building and pest inspection of your new acquisition may seem high for little benefit, it is an essential step in determining whether or not to acquire a home. Without these reports, you can subsequently find yourself shelling out thousands of dollars for repairs that weren't planned.
- Moving costs. This is a crucial point that many people frequently overlook. The cost of hiring removalists and cleaning services often ranges from $1,000 to $2,000, not including the time and inconvenience of boxing up your belongings.
- Maintenance costs. Long after the purchase date, upgrade fees are still incurred. Typically, a larger home comes with higher living expenses. Typically, larger homes and spaces result in higher utility costs. Additionally, if the backyard of your new home is extensive, horticultural upkeep will be necessary. These expenses are necessary for addition to the monthly mortgage payments you already make.
Should I keep my old house for investment purposes or should I sell it?
What you can afford ultimately determines the answer to this issue. Investing in real estate might be a wonderful method to ensure future wealth growth. The investment property might be rented out to help with the remaining mortgage payments. Rent turns into a great source of revenue once you pay that off.
Of course, owning investment property comes with a number of expenses to take into account. Your mortgage payments cannot be suspended. If your property is unoccupied, you must have the funds available to make payments while looking for new renters. This may occasionally last for several months. Additionally, you are responsible for paying for any upkeep and repairs, which can be challenging to prepare for. You will also owe capital gains tax if you decide to sell the property more than six years after leaving it.
On the other side, you might need bridging finance if you decide to sell your property. Obtaining a mortgage for a new property before selling an existing property is made possible by a bridging loan. They provide quick access to money at occasionally higher interest rates. You run the danger of spending significantly more if you are unable to sell your current property within the anticipated time frame. You might also have to sell for less. If you don't have enough security or funds, you can end up having to pay far more during the bridging period than you can truly afford.
Make sure to conduct your homework before deciding which course of action to take in the upcoming period of your life. These are the choices you make about property owners that will have an impact on your financial security in the future.
Author: Andrew Mirams is a highly skilled mortgage advisor and the managing director of Intuitive Finance. He has two diplomas, one in Banking and Finance and the other in Financial Planning (Financial Services) (Mortgage Broking). Andrew has more than 27 years of expertise and has won numerous accolades, including being consistently included in lists of the top 100 mortgage brokers and the Top 50 Elite Business Writers. Intuitive Finance earned the 2016 "Best Independent Office" and "Best Customer Service" awards at the recent 2016 Better Business Awards. He was Victoria's favourite mortgage broker at the 2015 Investors Choice Awards. Check out Intuitive Finance for more details.
When to upsize and how to do it
Do you ever have the impression that your house is too small for your family? There comes a time, for many different kinds of families, when the house starts to feel a little bit small, and it can even feel like you don't fit in there at all. How do you know when it's time to start considering moving up in size? And what must be in place before you begin to take action?
When to upsize your home
Growing your family
If you have children who are of school age and are getting ready for secondary school, you will notice that they will start expressing a larger interest in having their own room. This is especially true if they will be attending secondary school. It's possible that they're sharing a bedroom, or that your residence only has one living room to go around. As the children get older, these challenges relating to space will become more difficult.
New members of the family
After a baby is born, a family goes through a lot of transitions that they weren't expecting. If space is already at a premium in your home, welcoming a new member of the family will only make things more challenging. Consider how the existing members of the family will respond to the introduction of a new member and how it will change the dynamic. If you are feeling apprehensive, there is usually excellent reason for you to be feeling that way.
An ageing family
Not all of the newest members of the family are infants. The elderly members of a family typically demand a little bit extra assistance as they become older. If Grandma and Grandpa are going to be moving back into the family home, there might be some adjustments that need to be made to the current living situation. If there aren't any spare bedrooms or bathrooms, this could create a difficult situation for the other members of the household.
Preparing to upsize your home
Financial concerns when upsizing your home
The average cost of a home increases with its square footage. Before you make any decisions regarding the new home, you need to first determine whether or not you are in a position to comfortably afford it. Talk to someone who specialises in finances if you want to find out how much your present home and any other assets are worth. Consider whether or not you are eligible to refinance or consolidate your existing debt.
Costs associated with home sizing
In addition to the price that must be paid to acquire real estate, there are also ongoing costs associated with its management and upkeep. Adding more rooms to your house will result in an increase in your power and water bills, as well as an increase in the amount of time needed for cleaning and maintenance. Check to see that your budget can accommodate these increases before moving forwards.
Location
Are you just looking for a larger home, or do you want a completely new environment? Keep in mind the purpose of your move, particularly when researching potential new locations. It's possible that you'd like to move closer to your place of employment, further away from the centre of town in order to have a larger backyard, or nearer to good schools. In addition to being relevant when looking for a larger property due to the aforementioned size to expense-ratio, location is a key consideration for every relocation. This is because location affects a person's commute time, work environment, and overall quality of life.
When should you upgrade your home?
If you are planning to buy a larger home after selling your current residence, time is one of the most important factors you will need to take into consideration. If you don't have enough money from selling house A to pay for house B, you might not be able to relocate. On the other hand, you run the risk of losing your housing if you sell house A before buying house B, the dwelling that best suits your needs. If the timing doesn't work out, prepare a backup plan for a place to stay or talk to your bank about getting a bridging loan so that you can move into a new apartment before selling the one you're currently living in. Imagine the future and devise a plan to fix the problem.
Due to the fact that each and every family is unique, there is no answer that is "one size fits all." If you believe that your family has started to outgrow the existing dwelling that you are in, however, it may be time to consider upgrading to a larger home. Because you have a lot to think about and a crucial option to make about your finances, you should make sure that you are fully informed before making any decisions.
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