With the Adelaide Hills property market moving as fast as it is (and with no signs of it slowing down), it can be difficult to plan for. If you have houses to sell and buy simultaneously, there are various options available from a finance standpoint.
You don’t want to be left with paying two mortgages, nor is the sale something to rush. But with some forethought and planning, you can make an empowered decision that suits your family’s needs.
Troy Raymond, from Raymond Finance, has kindly laid out the three main options available in today’s fast-paced market for people who are simultaneously buying and selling properties.
This is traditionally the most common option for ‘buy + sell’ financing. A bank will look to take both properties as security and give you a timeframe to sell the original property. It’s beneficial because you’re not making repayments on the bulk of that debt until the property is sold, which is good cash-flow wise. However, this does command higher interest rates and fees, so it’s a more expensive option.
There are certain limitations, such as a six-month timeframe between when the loan settles on the new purchase to when you need to sell the first property. For new Adelaide Hills property builds, this is usually a 12-month window. Because of the pace of the current Adelaide Hills real estate market, relocation loans aren’t as popular as they were just three years ago.
Buy + sell loans
With your budget in mind for a new purchase and a ballpark figure on the sale of the previous property, ‘buy + sell’ loans are pre-approved amounts based on this calculation. From an income perspective, it’s a strong choice because you won’t be carrying two mortgages or large debt. It does, however, require you to sign ‘subject to finance’ and ‘subject to sale.’ And, the more conditions, the less favourably you’re looked at (especially when there are many cash buyers in the market).
Keep both properties & refinance
To help negate that, there’s a third option: hold onto both properties. While this option isn’t for everyone, you can buy the new house and transition the first one into an investment property. That way, you can put in an offer that’s just ‘subject to finance’, especially if you don’t know when you’ll sell.
You can take advantage of the record-low interest rates and refinance the current loan to secure a good rate (and even purchase the new property under today’s fixed low-rates). It’s important to understand the rental yield to make an informed decision.
While many people just want the simplicity of one loan, holding onto the previous property allows for speed in the current market. It’s a smart option if the time is right and you’ve considered owning an investment as a house for rent.
Circumstances can change, so keep in a tune with your lifestyle desires, family’s needs, financial situation, and the opportunities within the Adelaide Hills market. And as always, we’re here to help navigate the twists and turns of real estate – like an enjoyable, scenic Sunday drive in the Hills. For finance support, contact Troy from Raymond Finance on 0409 673 989.