Congrats! You’re moving up in the world. Not only have you ticked off that ever so challenging first-home purchase, you’re doing so well that you can afford a little more space or a better location. Go you!
But before we get too excited, let’s start thinking with our head again, not our heart. We know that from our first home purchase. Our heart can get us into all kinds of mischief, so here’s a few things to consider, courtesy of some clever brains.
How much will it cost?
First and foremost, let’s see how much this upgrade is going to set you back. It’s really important to get your finances in order before you begin the hunt or you might just disappoint yourself – or worse stretch yourself with a new home purchase you can’t afford. This is meant to make your life better, not worse!
So you need to look at a couple of things. First, your borrowing capacity. Talk to a mortgage broker about this – you don’t need to stay with your current bank. They’re not moving in.
You also need to look at your lifestyle and everyday living costs. Do you have a holiday planned in the next year? Are you planning to have more children? Will you be saving on public transport costs by moving closer to work? All this stuff stacks up. Write a budget for your next 2 years at least.
Of course, there are all those other associated costs with buying/moving – stamp duty, sales commission, moving costs etc. Make sure you factor these things into your budget.
Do you want to buy or sell first?
Ideally, if you want to minimise the stress of buying, you’ll sell your property first. That way you’ll know exactly how much money you’ve got in your pocket to shop for your new home. In this case, opt for a longer settlement to give yourself more time to shop.
Some people do decide to buy first and require some bridging finance. This kind of finance is a short-term, high interest loan that covers the cost of purchasing before you sell your current home.
Another option if you have the borrowing capacity, is to keep your current home as an investment. In the current market, there’s a good chance the rent will cover your mortgage repayments. But you’ll also need to consider tax implications. Talk to your accountant.
What does my future look like?
No one has a crystal ball but we’ve all got goals. If this home is going to be your forever home, make sure it can keep up with your growing family. Think about what life will look like for you over the next 10 years. Will you have teenagers that need space? Do you need to be close to certain schools or sporting fields? Are you planning to change the way you work?
Outside of your own future, make sure you take the suburb’s future into account. What changes are expected for the next 10 years? This is important to check for both your lifestyle and your property value.
It gets the best of most of us. Don’t let it get you too. Do your research, know your budget and keep your eye on the market. But don’t get so obsessed with getting the right buy that the market prices increase and you end up paying more.
Time to do the math
You’ve worked out how much you’d like to spend, now it’s time to start attending auctions and the like to get a real picture of prices. Gather sales data available and get as much information as possible to create some robust calculations. Of course, you won’t get caught up in analysis paralysis here. It doesn’t take too long to get a picture of the market.
Are you ready?
We are too! Save yourself the stress of calculations and finding your new home in the nick of time. We’ve got that covered. Let’s chat!