If you’re a homeowner, there’s going to come a time when you’re ready to rightsize again. The eternal question is: Do you buy first or sell first?
Whatever the market, it can be tempting for risk-averse sellers to sell first so they have certainty about how much they have to invest in their new property. However, in a property market when prices are rising quickly, that strategy can be risky in itself as you could be priced out of the market.
Of course, in the Sutherland Shire property market, timing is everything. Buying before you sell can leave you open to servicing two mortgages.
When to buy first in Sutherland Shire
When property prices are on the rise (as they are more often than not in the Australian property market), you might want to lock in your new home before it’s priced out of your reach. However, generally you have to sell your own home to finance the purchase. For the interim period, you might need to take out a bridging loan.
A bridging loan is a short-term loan (usually interest-only) that gives you the flexibility to buy a property before selling your old property.
You’ll find most bridging loan lenders offer competitive rates for up to 12 months. After that, it tends to get expensive, depending on the lender and how your loan is structured. However, it’s rare that buyers or sellers need bridging loans for longer than 12 months.
Buying a new home first before selling can be a bit of a gamble for homeowners in marginal areas or where there’s oversupply. For homeowners in Sutherland Shire, it’s more of a controlled risk. We’ve seen consistent demand for many years and the Shire continues to be a desirable area. So not so risky. Plus property pundits predict continuing price rises, especially in Sydney.
Taking the decision to buy first in a rising market means you have the time to find your dream home without the pressure of having to move out of your home. You might also negotiate a longer settlement period for the new home, which will give you the opportunity of finding a suitable buyer for your existing home. And if you aren’t in a rush to move, you could consider renting one of the properties.
When to sell first in Sutherland Shire
When the market is in decline (and your agent is advising you that the situation is likely to continue for some months), you’re better off selling first.
Selling first is also great if you’re a bit risk-averse as you know exactly how much money you have to put towards your new purchase.
It’s also a good strategy if you’re downsizing or you intend to buy in a regional area where you know prices are lower than they are in Sydney.
Talk to your lender
Before you leap into action, it’s worth talking to your lender so you know you won’t be caught short with finance. If you’re considering buying first, your lender might advise extending your current mortgage to cover the cost of the new property or perhaps offer a deposit guarantee, which might mean you won’t need to take out a bridging loan if you intend to buy first.
Research the market
Before you make a decision, you want to engage a real estate agent to help you. Yes, you can do your online research or scour the papers but we can give you a more complete picture of sales, time on market and prices so you can make a more informed decision. We’re here to help you negotiate settlement times and help you prepare your home for sale.
Can we help with advice on downsizing?
Having navigated the home sale and downsizing process not only for our real estate clients but also for members of our own family, it’s an area in which we’ve amassed a wealth of knowledge. So don’t hesitate to seek out our help – no obligations.