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Matt W.
Matt W.
Roseville, NSW

We are looking to buy a new home to live - can you provide some advice as to how we should go about it as we will need to sell our existing home - should we sell before we buy?

8 years ago


You can buy before you sell but there are a couple of challenges and solutions.
The first one is to have your mortgage broker or bank value your existing property and work out how much eqiity you have. Often there is enough equity to do a bridging loan. Which is simply a loan that lends against your current and the new property.
Typically the lender will be looking for aound 10% of the value in the new and existing property being available as equity or cash.
If you don't have this much equity the.other option is to make an offer on a property subject to you selling your property at auction on a given date. This can be very stressful as you are left having to sell at auction typically. I have seen this work though particulary where the new home is an established one and the vendor is not in a rush to sell, an older couple retiring for example.
The third option is to have your broker arrange for the loan to remain open with a cash security. You then sell your property with a 3-6 month lease agreement zo you can remain in the property untill you find a new one. The benfeot of this is once you find a property you essentially have cash in the bank and can often settle in as little as two weeks.

I hope these suggeations help. Have an awesome day.

Hi Matt,

Always so hard to know what to do as there are a few ways you can approach this. All options have different degrees of risk and it is a matter of which option you are most comfortable with.

If you sell before you buy, request a longer settlement term such as 12 weeks. If you have a pre approval based on your property selling for "X" and your proposed loan after sale would be "Y" least you know you are covered for your anticipated purchase. This gives you good time to find a property that suits you and your families needs.

Secondly, if you have enough equity in your current home, you can look at bridging finance. Bridging finance enables you to purchase now and sell later. You hold the finance for both properties initially - known as peak debt - and then once your current property is sold and you pay down the peak debt, you are left with your end debt. The interest rates are not loaded with a premium like they used to be but the cost is more that the interest on the loans for both properties is accumulated to the loan and if your property takes a few months to sell - this can add up. You can opt to make repayments throughout this time too so this can reduce the long term cost.

Thirdly if you have the borrowing capacity, deposit and equity to hold both properties and sell once you have moved into your new home you could have a loan for both properties. This has a higher responsibility and risk on you and can be stressful if your loan is a significant amount of debt to cover.

In order to work out the best option and solution for you, have a chat to your broker who will be able to discuss the pros and cons of the available options.

Good luck with it and if you need any help or have further questions, I'm only too happy to help!

Nicole :)

Hi Matt

There are a couple of ways you can tackle this. Ideally a simultaneous purchase and sale would be the way to go, however there may be times when the sale of your property may go through before you settle on the property that you have purchased; likewise the property you have purchased may settle before you sell your property.

There are methods you can use in the event that you cannot achieve a simultaneous purchase and sale.

Bridging loans (or go between loans) can be of assistance if you happen to settle on your purchase before you sell your house. If the reverse happens you can make it conditional that settlement on the sale of your property be delayed to coincide with your purchase or negotiate with the purchaser to rent back your house until you can settle on the property you are purchasing.

Hope this helps.

Good luck with your house hunting.

Hi Matt,

there are couple things to consider:
if your current loan plus the purchase price of the new property plus costs is less than 70% than the value of the two properties together, you could get a bridging loan that allows you to buy and sell your existing property within 1 year of the purchase.
However, if the existing loan is relatively high compared to your propert value, you would be better off selling first or buy and sell and make the settlement on the same day.

hope that helps.

Hi Matt

You don't necessarily have to sell your current home first. Using a bridging loan or deposit guarantee you can certainly put a deposit on your dream home prior to selling your existing home, and you can do this without spending any money prior to settling on the sale of your home.

There are eligibility criteria to use these products which I am happy to discuss.

Kind regards

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